Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

WAYS AND MEANS

SESSIONAL RETURNS

Ordered,
That there be laid before the House Returns for Session 1997–98 of information and statistics relating to—

(1) Business of the House;
(2) Closure of Debate, Proposal of Question and Allocation of Time (including Programme Motions);
(3) Sittings of the House;
(4) Private Bills and Private Business;
(5) Public Bills;
(6) Delegated Legislation and Deregulation Orders;
(7) European Legislation, etc;
(8) Grand Committees;
(9) Chairman's Panel; and
(10) Select Committees.—[The First Deputy Chairman of Ways and Means.]

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

The Secretary of State was asked—

New Zealand

Mr. Dafydd Wigley: What representations he has received from the New Zealand Government on matters relating to trade between New Zealand and the United Kingdom. [61419]

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): There have been no formal recent representations from the New Zealand Government on trade-related matters, but the New Zealand and United Kingdom Governments regularly co-operate on various matters, including trade.

Mr. Wigley: I am grateful for that answer and glad to understand that the New Zealand Government have not become over-enthusiastic about the difficulties with trade in sheep that arise from our domestic problems in the sheep sector. Will the Minister keep the New Zealand Government abreast of developments in that sector, so that they understand the difficulties under which farmers

have been labouring in the United Kingdom? Hopefully, within a year or so, we may be able to withstand the full rigours of trade once again.

Mr. Fatchett: I am happy to give the right hon. Gentleman that commitment. We continue to discuss a range of trading issues with the New Zealand Government, including the trade in lamb, and we will certainly take up the points to which he referred.

Dr. Julian Lewis: Will the Minister confirm that there is no prospect of this country trading its successful first-past-the-post electoral system for the disastrous proportional representation system, which has done so much to undermine parliamentary democracy in New Zealand?

Mr. Fatchett: I congratulate the hon. Gentleman on a very wise question. From my own perspective, I would say that we had a great deal to learn from New Zealand on that issue.

Middle East Peace Process

Mr. Lawrie Quinn: When he next expects to meet President Arafat to discuss the implementation of the Wye agreement; and if he will make a statement. [61420]

Mr. Neil Gerrard: If he will make a statement on the current situation regarding the middle east peace process. [61382]

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): We will be doing everything we can to build on the breakthrough in the middle east peace process secured at Wye Plantation. Yesterday, the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Leeds, Central (Mr. Fatchett), who has responsibility for middle eastern affairs, attended the donors' conference in Washington, and he has flown through the night to be with us today. He announced a package of assistance to the Palestinian authority and the United Nations Relief and Works Agency for Palestine refugees in the near east totalling more than £100 million, both bilateral and European Union.
My right hon. Friend the Prime Minister met President Arafat in London immediately before the Wye talks and we both met Mr. Netanyahu last week. We have congratulated both President Arafat and Mr. Netanyahu on their statesmanship in achieving the Wye agreement and on their courage on the start to implementing it.

Mr. Quinn: I thank my right hon. Friend for that statement. Does he agree that both the Prime Minister of Israel and President Arafat have shown considerable courage in concluding the Wye agreement? Will he tell us how the Government, with their European partners, will ensure that both sides show the same resolve after this period of negotiation to move to a final and lasting peace in the middle east?

Mr. Cook: I very much share the sentiments behind my hon. Friend's question. As I announced, Britain is


committed to major financial support for the peace process and is the largest donor to UNRWA, which deals with so many of the Palestinian social issues. One way in which Europe can greatly assist in taking forward the peace process is by achieving momentum on economic issues. I am delighted that we have secured the opening of Gaza airport and we must now achieve the same for the Gaza seaport. If we want peace to be deeply rooted, we must prove to ordinary Palestinians in Gaza and the west bank that they will also benefit in material terms from the peace process.

Mr. Gerrard: Does my right hon. Friend agree that, important though the Wye agreement may be, the fundamental foundation for lasting peace must be the Oslo accords and UN resolutions, some of which have still not been implemented, and which recognise the illegality of the occupation of the west bank and of the continued expansion of settlements there? Will he do what he can to emphasise to both sides, but in particular to the Government of Israel, that lasting peace and real security can be achieved only through honouring the promises made at Oslo?

Mr. Cook: My hon. Friend is right to draw attention to the fact that, although the Wye Plantation agreement is an important step, we have a long way to go. The significance of that agreement is that it is a step in the right direction, and it gives us an opportunity to build momentum to take us towards the final stages talks that were envisaged at Oslo. On the settlements, I said last week when Mr. Netanyahu was here, and have said on many occasions, that we would not want either side to take any provocative unilateral action that made it difficult to make progress on peace negotiations.

Zimbabwe

Mr. Graham Brady: What recent representations his Department has made on the issue of land reform in Zimbabwe; and if he will make a statement. [61421]

The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): We have expressed our concern to the Zimbabwe Government about their decision to issue 841 acquisition orders. In our view, the Zimbabwe Government's actions represent a major step back from the position agreed by all sides at the land conference in September. We will continue to press the Zimbabwe Government to follow the due process of law, including the right of appeal against acquisition and for fair compensation.

Mr. Brady: I am grateful to the Minister for making clear the Government's opposition to the policy of the Zimbabwe Government in seeking to confiscate land, which is illegal, as he said, as well as racist. Will he make it clear that that condemnation extends to ceasing British Government aid to Zimbabwe should confiscation proceed?

Mr. Lloyd: No, because British aid to Zimbabwe is not programme aid. It is not Government-to-Government aid, but aid tied to projects that are designed to help the poorest people in Zimbabwe. It would be irresponsible to

say that we wanted to pursue—as we do—co-operation with the Zimbabwean Government that would have the effect of distributing land in a way that favoured the poor of Zimbabwe while threatening to cut off aid designed to help precisely those poor Zimbabweans.

Mr. Ian Davidson: Although I have criticisms of the way in which the Zimbabwean Government have proceeded, does the Minister accept that inequality of land ownership and control must be addressed? Will he undertake that the British Government will do all that they can to ensure that the severe difficulties faced by many ordinary Zimbabwean citizens are addressed?

Mr. Lloyd: Yes, consistent with what I have already told the House, the British Government have always made it clear that we would support a process of land acquisition that had certain features. The process must be transparent; at the moment, we do not have that certainty. It must be fair, which means that there must be an adequate compensation package and an adequate challenge regime. In particular, the land transfer must favour the very poorest people in Zimbabwe, not those who seek to better their own already well-funded personal circumstances. Within that, we will help the Zimbabweans, but not on the basis of their present proposals.

Mr. Michael Howard: Does not the project aid of which the Minister spoke enable the Government of Zimbabwe to spend huge sums on prosecuting a war in the Congo? Is there not a case for reconsidering that aid in the light of that expenditure and of their land expropriation proposals?

Mr. Lloyd: No. That is not the effect of our assistance, which, whether the right hon. and learned Gentleman likes it or not, goes to the poorest people in Zimbabwe. If he believes that the Zimbabwean Government would replace British project aid with Zimbabwean Government assistance, he is wrong. It is in those circumstances that we will continue our policies for poverty eradication in Zimbabwe. We call upon not only the Zimbabweans, but all parties to the war in the Congo, to operate an effective ceasefire, get round the conference table and end the conflict.

Cuba

Mr. Colin Pickthall: When he next intends to visit Cuba to discuss the state of its economy. [61383]

The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): My right hon. Friend the Foreign Secretary has no plans to visit Cuba. However, my noble Friend the Under-Secretary made the first ministerial visit to Cuba under this Government in October, followed in November by my hon. Friend the Minister for Trade. Both discussed with their Cuban interlocutors, among other things, the prospects for the Cuban economy.

Mr. Pickthall: Does my hon. Friend share my dismay that, last month, the United States stepped up its trade


sanctions against Cuba? Does he agree that there is much to be gained by Britain and Cuba stepping up their trade relationships a gear, for example, in respect of food and engineering equipment exports? Cuba is desperate for both. Is there any way in which Britain can help Cuba in the development and marketing of the meningitis vaccine that it has produced, which would greatly benefit Britain and the world?

Mr. Lloyd: My hon. Friend knows that it has been the policy of successive Governments that constructive engagement with Cuba will be more helpful in bringing it to acceptance of basic democratic standards and human rights than the process pursued by the United States. He is right to point out that we already have many exchanges, in terms of both trade and science. A team from Imperial college will shortly make a third visit to Cuba to conduct a further assay and to follow up clinical tests in connection with the meningitis vaccine pioneered in Cuba. That vaccine is significant, and I met the research team who developed it some time ago. It may become the world's first and only effective vaccine against meningitis B. If the Imperial college team concludes accordingly, it will be put to the Medicines Control Agency for approval for licensing within the United Kingdom. That will be a great step forward, not only in the fight against meningitis, but for Cuban medical research.

Mr. John Wilkinson: Is the Minister aware that Latin America will perceive Her Majesty's Government's policy toward Cuba as selective and partial, in that no fewer than six of Her Majesty's Ministers have visited that tiny island, whereas a comparable number have not visited other Latin American countries? The economy of Cuba is, to be candid, a basket case. Is the Minister aware that our exports to Cuba went down last year, from £24 million to a mere £19 million; that our exports to Chile, which has a population similar to that of Cuba, went up to £210 million—a rise of £44 million; and that our imports from Chile went up by £220 million, whereas imports from Cuba fell by £4 million? Is that a good investment on the part of Her Majesty's Government?

Mr. Lloyd: I am genuinely astonished if the Opposition believe that we should denigrate Cuba in particular and the Caribbean in general. If that is the import of the hon. Gentleman's comments, he is seriously wrong. We want to have strong relations, not only with Cuba and the Caribbean as a whole, but, beyond that, with Latin America. Our relations with Latin America have improved enormously in recent years and are continuing to improve. There has been, and will continue to be, a steady flow of ministerial visits, not only to Cuba, but to other parts of Latin America. That is good for Britain and good for Latin America. I am sorry that the hon. Gentleman does not share that view.

Western Sahara

Mr. Jeremy Corbyn: When he expects the UN to be able to conduct a referendum on the future of the western Sahara. [61385]

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): The UN has proposed to Morocco and the Polisario that a referendum should take place in December 1999. We hope that that deadline can be met.

Mr. Corbyn: Does the Minister share my disappointment that the Secretary-General of the United Nations should have proposed yet another delay, for a further year, to the referendum? Is not the real reason for that delay Morocco's obstruction of the process of registering refugees living in the camps and other people living in the region? Is not the UN being seriously obstructed in its desire to hold the referendum, which should have been held many years ago?
Is there anything my hon. Friend can do to ensure that MINURSO—the United Nations mission for the referendum in Western Sahara—carries on and is fully funded, and that the refugee camps are fully supported and funded? Above all, will he do what he can to ensure that the date of the referendum—currently December 1999—is significantly brought forward? If it is not, the UN will be brought into disrepute. I fear that Morocco will try to delay the referendum beyond that date and that the people of the western Sahara will be denied the opportunity to decide their own future.

Mr. Fatchett: It is important that the referendum should take place and that it should take place as early as possible. I share my hon. Friend's concern about the further delay. He is right to say that the referendum must be fair and be seen to be fair, and that it must have the confidence of all the parties. He is also right to conclude that the best way forward for the western Sahara is for the referendum to take place, because that is the only way in which we shall be able to determine the feelings and aspirations of the local people.

EU Enlargement

Mr. Bernard Jenkin: If he will state his objectives for the Austrian EU presidency in respect of EU enlargement. [61386]

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): The screening process for the first six candidate countries has now been completed for half of all the chapters of European law. Substantive negotiations have now begun on a quarter of them. At the Vienna European Council, we shall review the recent report of the Commission on all the dozen candidate countries, which concluded that most candidates were making good progress with their preparations for membership.
We must not underestimate the real problems in achieving the biggest-ever enlargement in the history of the European Union. Nevertheless, the Government firmly believe that the problems of enlargement are much less important than the benefits from strengthened prosperity, stability and democracy in central and eastern Europe.

Mr. Jenkin: It is now nine years since the Berlin wall came down; since then, some 20 to 30 former Soviet bloc states have been crying out for full inclusion in the institutions of western democracy. Has the EU not failed those countries, which are struggling to emerge from


poverty and misrule, by continuing to apply protectionist policies? Is it not clear that the European Union's real agenda is not enlargement, but monetary union, tax harmonisation and the Franco-German agenda of a single European state? A date is still to be set for the admission of a single former Soviet bloc state.

Mr. Cook: I gently remind the hon. Gentleman that I can take ministerial responsibility only for the last 18 months of those nine years. He might like to address his remarks to those who served on the previous Conservative Government's Front Bench. If he wishes to draw a parallel, he should look at what occurred during the last enlargement involving Austria, Finland and Sweden. It took three years to negotiate enlargement for only three countries, all of which were wealthy and were net contributors to the European budget. It is a bit rich for the hon. Gentleman to complain that we have not completed enlargement in nine months for 12 countries, all of which are poor and will be net recipients from the European budget.

Ms Rachel Squire: Does my right hon. Friend agree that this Government have demonstrated a far more positive commitment to Europe in the past 18 months than the previous Government demonstrated in 18 years? As a result, this Government have far more credibility in arguing for progress on European enlargement than the previous Government who, for 18 years, adopted a narrow, isolationist approach to everything European.

Mr. Cook: The proof of my hon. Friend's point is borne out precisely by the fact that this Government have managed to start beef exports to Europe while the previous Government started a beef war with Europe.
However, there is room for further improvement. I can report to the House that the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Gateshead, East and Washington, West (Ms Quin), is convening a new ministerial group to co-ordinate our policies on Europe. It will tomorrow hold its first meeting, which will be chaired by my right hon. Friend, and is an excellent advertisement for joined-up government.

Mr. Menzies Campbell: Will the Foreign Secretary take this opportunity to state to candidates for membership of Europe and to existing members that the Government have no intention of proceeding down the road of tax harmonisation and that there is everything to be gained, and nothing to be lost, from concerted European-wide action against tax evasion?

Mr. Cook: The hon. and learned Gentleman will be aware that a Treasury Minister is leading the work within ECOFIN to take action on unfair tax breaks, which attract industry and investment from our country as well as from others in the European Union, in areas where we have a clear national interest in ensuring that there is a level playing field.
There are no proposals to harmonise either the zero rate on value added tax or income tax, for that matter. I do not believe that any such proposals could muster majority, never mind unanimous, support. We should all try to deal with the reality of Europe rather than with the fantasies that some people are trying to sell.

Dr. Norman A. Godman: Does my right hon. Friend agree that reform must precede

enlargement? For example, there can surely be no enlargement before the common agricultural policy and the common fisheries policy are reformed. We should perhaps also examine the modus operandi of the European Parliament and the European Court of Justice.

Mr. Cook: My hon. Friend is absolutely correct: the onus for preparing for enlargement does not rest entirely with the candidate countries. The European Union must also do its work. A particularly important part of that work is reform of the CAP, which the European Union is committed to completing by next March. We believe that the 30 per cent. cut in intervention prices on beef, the 20 per cent. cut on cereals and the 15 per cent. reduction in milk quotas will have a major impact on the CAP and will save British consumers £1 billion a year. That is a prize well worth fighting for in the interests of Britain and of enlargement.

Qualified Majority Voting

Mr. John Bercow: If he will make a statement on the extension of qualified majority voting as a result of the treaty of Amsterdam. [61387]

The Minister of State, Foreign and Commonwealth Office (Ms Joyce Quin): As the hon. Gentleman will be aware from the parliamentary ratification of the Amsterdam treaty, qualified majority voting was extended in several areas, including the fight against fraud and promoting transparency. The Government believe that those extensions are very much in Britain's interests.

Mr. Bercow: Now that the Foreign Secretary's German counterpart, Joschka Fischer, has admitted that the creation of a single European state is the decisive task of our time, how can the right hon. Lady guarantee that qualified majority voting will never be used to introduce measures that would force this country to be a mere province of a single European state?

Ms Quin: It is clear from what was agreed at Amsterdam and in previous treaties that unanimity remains the rule in important areas, including institutional and treaty changes, and we are in favour of that. I remind the hon. Gentleman that significant extensions of qualified majority voting took place under the Maastricht treaty and probably the most significant extension was introduced by the Single European Act passed by Lady Thatcher's Government.

Mr. Mike Gapes: Does my right hon. Friend agree that to make the European Union more democratic and functionally efficient, any EU enlargement will necessitate an extension of some forms of qualified majority voting? It is palpably absurd for the Conservative party, on the one hand, to call for enlargement seemingly without restrictions and, on the other hand, to oppose any extension of qualified majority voting.

Ms Quin: We are keen to make enlargement a success. As was made clear at Amsterdam, we shall have to consider the institutional arrangements foreseen in that


treaty to prepare for enlargement. We believe that we can do that while safeguarding the important areas that can progress only if all countries are in agreement.

Mr. Michael Howard: First, I congratulate the right hon. Lady on her new, co-ordinating responsibilities, which the Foreign Secretary announced a few moments ago. I thank the Foreign Secretary for his astonishing admission that, for the past 18 months, the Government's European policies have not been properly co-ordinated.
In view of the apparent importance now attached by the Government to the veto, does the right hon. Lady now accept that the extension of majority voting at Amsterdam was a mistake? Is it not undeniable that she and her colleagues will now be utterly helpless in the face of measures that they claim to oppose, such as the extension of works councils?

Ms Quin: It is difficult to take seriously the right hon. and learned Gentleman's point about co-ordination because he was a member of a Government who were disunited on European issues. The purpose of the co-ordinating committee, which I shall chair, is simply to build on the success achieved by the Government during the British presidency, when Departments worked together effectively.
I am sorry that the right hon. and learned Gentleman insists on repeating completely unjustified scare stories which have been substantially aired during the past few days. The measures agreed under the Amsterdam treaty were very much in Britain's interests and do not affect the policy areas to which the right hon. and learned Gentleman referred.

Kosovo

Ms Gisela Stuart: What discussions he has had with countries bordering the Former Republic of Yugoslavia about Kosovo. [61388]

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): I visited Bulgaria, Macedonia and Romania in late October and Slovenia last week. Kosovo was one of the key elements of my discussions in all four countries. In Macedonia, I met Professor Agani, the leader of the Kosovar negotiating team, who expressed the thanks of the Kosovar people for Britain's efforts to secure an end to the conflict.
All four countries are developing closer ties with the European Union. So long as President Milosevic pursues policies of ethnic confrontation, he will condemn Serbia to be left further behind in the modern Europe.

Ms Stuart: Will my right hon. Friend assure me that the Government will continue to do everything to support those in Kosovo who seek a peaceful, negotiated solution to the problem? More specifically, what are the Government doing to support the development of independent media in the area?

Mr. Cook: I assure my hon. Friend that we are very much in the lead on the ground in Kosovo, making a reality of the Holbrooke package. As from this week,

73 British personnel will be attached to the Kosovo verification mission—one of the largest contributions from any European or international state. Media repression is a matter of grave concern, especially in view of the media law that was passed in October, which prevents all Serbian broadcasters from rebroadcasting foreign news agencies, including the BBC World Service. I have, therefore, asked my officials to investigate the feasibility and funding of a transmitter in the region which can rebroadcast those foreign news agencies. President Milosevic may not want his people to hear the truth, but it is important that we do not let his ban prevent them from doing so.

Mr. Michael Trend: In the light of recent discussions on Kosovo, have the Government decided to send extra troops to Macedonia to join the NATO extraction force—troops, one supposes, which may be called on to operate in Kosovo? There was a report to that effect in yesterday's edition of The Daily Telegraph, and one on the BBC today, although I understand that no announcement has been made. Surely in this matter of potentially far-reaching consequences, the House is entitled to know what is going on.

Mr. Cook: There have been repeated statements on Kosovo; I made one only a couple of weeks ago. Indeed, preparations with regard to Macedonia, about which there have been questions, have been no secret. We have repeatedly said that we are willing to support the quadripartite unit in Macedonia; it flows from our discussions with Germany. We will be the second largest contingent in that force. Of course, we fully intend to hold President Milosevic to his assurance that the verification mission will not in any way be intimidated or hampered by the Serbian security forces, although it is important for reassurance that our capability is near at hand.

Mr. Ernie Ross: How will Her Majesty's Government ensure that the plight of refugees and displaced people is improved as winter approaches, so that we do not see again horrific scenes of them in the mountains or under inadequate shelter?

Mr. Cook: I am pleased to say that we have achieved substantial progress in removing refugees from the open hillside and that, over the past two months since the Holbrooke package, the numbers have fallen from 50,000 to a few hundred. Nevertheless, my hon. Friend is quite right to express concern about the continuing position of refugees. Although they have returned to their former villages, many of their homes have been shelled. It is, therefore, essential that we continue the humanitarian effort to ensure that they are sheltered, fed and, with proper health support, are able to survive throughout the winter. Britain is very much in the lead in supporting that effort, and will continue to do so.

Myanmar

Rev. Martin Smyth: What recent representations he has made to the Government of Myanmar concerning treatment of the Karen population. [61389]

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): We regularly make representations to the Burmese authorities on the treatment of ethnic minorities, including the Karen—most recently on 25 November.

Rev. Martin Smyth: I welcome the Minister's response. Does he agree that the State Peace and Development Council has perpetrated one of the most tragic scenarios of ethnic cleansing and genocide? What can be done internationally to stop such events, prevent further atrocities and aid victims, bearing in mind that hundreds of thousands of Karen and others have been so eliminated?

Mr. Fatchett: What has happened to the ethnic minorities in Burma is a true but sad reflection of the regime's nature. That is why we constantly argue for the international community to be vigilant, to maintain the pressure and to work for a restoration of democracy and a respect for human rights. We have provided £250,000 of humanitarian aid in the 1997–98 financial year. I also discussed the issue in Thailand earlier this year in order to ensure some co-ordination in providing support for ethnic minorities.

Mr. David Heath: Given the uniquely abhorrent nature of the regime in Myanmar and the quite uncalled-for action against the Karen, Karenni and other peoples, will the Minister give an absolute assurance that the Government and the European Union will do everything possible to put pressure on the Myanmar authorities? To that end, will he explain why Mr. Win Aung, Foreign Secretary designate of Myanmar, was admitted to this country last week?

Mr. Fatchett: The answer to the hon. Gentleman's first question is yes, we shall continue to give that commitment.
The second question refers to the Burmese ambassador, who returned to the United Kingdom as ambassador, not as Foreign Secretary. When he becomes Foreign Secretary he will enjoy no right to enter the United Kingdom because of the European Union's common position. We shall certainly safeguard it; indeed, the United Kingdom strengthened that position at the most recent meeting of the General Affairs Council.
My position on Burma is now so strong that I have been told today that the Burmese authorities will not allow me to visit Burma. I see that as an accolade for the work that we have done and for our fight for human rights and democracy in Burma.

Mrs. Maria Fyfe: One of the Government's first actions was to stop financing trade missions to Burma, and many human rights activists throughout the world were very pleased about that. However, does my right hon. Friend agree that the campaign must be stepped up—that the destruction of human rights in Burma is so severe that we need a campaign on the scale of that mounted against apartheid in South Africa? What action is being taken by European Union states to advance that cause?

Mr. Fatchett: The European Union toughened its position in October 1998. We have strengthened our

position against the regime on visa issues. We have also issued a statement advising people not to go to Burma as tourists. The position is strong. At the General Assembly of the United Nations on 12 November 1998, we co-sponsored a resolution again condemning the Burmese regime for its violation of human rights.
I very much share my hon. Friend's views. This issue should unite the House in condemnation of a regime that is unique in the atrocities that it commits against its own people.

Iraq

Mr. Stephen Day: If he will make a statement on the United Kingdom's relations with Iraq. [61390]

Mr. Dale Campbell-Savours: If he will discuss with his American counterpart future policy towards Iraq. [61391]

Mr. Christopher Fraser: What recent representations he has made to the Government of Iraq concerning the status of United Nations Security Council resolutions. [61392]

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): We have made it clear to Saddam Hussein that our forces remain in the Gulf and remain on alert. If he breaks his undertaking to allow UNSCOM to resume inspections, we are prepared to take military action without further negotiation.
There will be no let-up in our pressure on Saddam Hussein until we are satisfied that he no longer has weapons of mass destruction with which to inflict on neighbouring countries the terror tactics that he uses to oppress his own people.

Mr. Day: The right hon. Gentleman will be aware that, at a recent Prime Minister's Question Time, my right hon. Friend the Leader of the Opposition suggested to the Prime Minister that it should be a prime objective of British policy to remove Saddam Hussein from power, and the Prime Minister appeared to agree with that suggestion. In the light of BBC reports that imply that the Government do not agree that removing Saddam Hussein is their prime objective, will the right hon. Gentleman please tell the House the exact position?

Mr. Cook: I do not know which BBC programmes the hon. Gentleman has been watching, but I have repeatedly said on the BBC that the whole world, including the Government, would welcome the removal of Saddam Hussein. That is why my right hon. Friend the Member for Leeds, Central (Mr. Fatchett), the Minister with responsibility for matters in the region, recently met representatives of all the opposition groups in Iraq and explored with them how we might help them. However, if they are to succeed, those groups must work together more closely.

Mr. Campbell-Savours: On the same question—my question having been asked earlier—is it not true that the American Administration has gone further? Following


passage through Congress of the Iraqi Liberation Act, effectively American foreign policy is now to engage more openly in the removal of Saddam Hussein, and America is helping that process by allocating $90-odd million to the Iraqi National Congress. Is there not a marginal distinction between our policy and American policy, and cannot we be more robust and adopt what I believe to be a better American position?

Mr. Cook: I am sorry to say that, as my hon. Friend's question has already been asked, it has already been answered. However, to respond to his last point, I do not think that it would be possible to find a country that has been more robust than the United States and the United Kingdom on the issue of Iraq. During the recent crisis, we gave authority for our pilots to take off unless Saddam backed down, which he did there and then.
We have shown great robustness on this issue and we shall certainly continue to do everything possible to assist those who wish to return Iraq to a more accountable system of government, and one that would engage with the international community. In the meantime, we shall continue our work to ensure, as best we can, that we provide the assistance that is required—humanitarian relief for the people of Iraq to spare them from the consequences of the way in which they have been oppressed by Saddam Hussein.

Mr. Fraser: What part does the fate of Kuwaiti prisoners play in assessing Iraq's compliance with United Nations resolutions?

Mr. Cook: The 600 people who were removed from Kuwait and are currently believed to be detained, or who were certainly detained for a time in Iraq, feature in United Nations Security Council resolutions. Therefore, if Iraq wishes fully to comply with those resolutions, which is a condition for the lifting of sanctions, it has either to produce those 600 people or to give a clear account both to Kuwait and to the international community of what has become of them.

Mr. Tam Dalyell: What would be the objective of bombing Baghdad, a city of 4.5 million people with two ambulances, neither of which has oxygen, and a fire engine that possibly does not work—Dresden, perhaps?

Mr. Cook: The House would not expect me to disclose specific targeting plans, but I can say—

Mr. Dalyell: If my right hon. Friend talked to them properly, it would help.

Mr. Cook: My hon. Friend is very free with his allegations, so perhaps he will allow me to respond to them.
The plans that have developed take very careful account of the need to minimise casualties as far as possible, and especially civilian casualties. There is therefore no question of a mass bombing of Baghdad on the scale that my hon. Friend suggests.
I am sorry to hear that Baghdad has only two ambulances. There is absolutely no sanction to prevent Iraq from importing all the ambulances that it requires. Thanks to a resolution pioneered by the United Kingdom, Saddam Hussein can export $10 billion-worth of oil to pay for the import of food, medicines and humanitarian goods. If he is so short of ambulances, we would be delighted to assist, through the Sanctions Committee, in ascertaining how many ambulances he needs—if he would choose to put them on the list that he submits in place of some of the other claims for humanitarian goods that he has made, such as glass ashtrays, cigarettes, alcohol and plastic surgery.

Mr. Edward Leigh: How do the Government envisage Saddam Hussein will be removed?

Mr. Cook: As I have said to the House, we have already met the Iraqi Opposition. We shall continue to work with them. We have no legal base for using force for the removal of Saddam Hussein, but we will use force to make sure that Security Council resolutions are implemented.

Mr. Harry Barnes: Do the Government share the Pentagon's estimate that 10,000 people would be killed in any bombing of Iraq? If not, what is the Government's estimate? Do they think that, whatever the number, it is a price worth paying?

Mr. Cook: First, I do not recognise that figure. We do not share that figure. Secondly, undoubtedly the price for Iraq's behaviour and Saddam Hussein's Government is being paid by the Iraqi people. I urge my hon. Friend to read the reports of the United Nations on human rights in Iraq, one of which was published only last month. He will see from them that, every year, thousands of people in Iraq pay with their lives for being ruled by Saddam Hussein.

Mr. Andrew Robathan: Will the Foreign Secretary publicly express his support for the campaign of INDICT set up by the hon. Member for Cynon Valley (Ann Clwyd)? Will he act as best he may in international circles to have Saddam Hussein and others arraigned before either an international tribunal or an international criminal court as soon as possible, and thereby give hope to the many millions of people in Iraq who are terrorised by Saddam Hussein and want to see the international community to take action against him and split him from the peoples of Iraq?

Mr. Cook: I am pleased to say to the hon. Gentleman that the Government fully support INDICT. My right hon. Friend the Prime Minister is sending a message to the press conference today expressing that support on behalf of the Government. We are ready to look at any means by which Saddam Hussein may be brought before any international tribunal, but the Government's immediate priority is to ensure that we succeed in the establishment of an international criminal court, which would be very relevant to Saddam Hussein and to any future Saddam Hussein.

International Criminal Tribunals

Ms Helen Southworth: If he will make a statement on his Department's support for the international criminal tribunals in Rwanda and the former Yugoslavia. [61393]

The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): We strongly support the work of both tribunals and have given substantial assistance to both of them, in addition to our mandatory contributions.

Ms Southworth: What steps will the Government will take to ensure that President Milosevic complies with the UN resolutions and provides support for the Yugoslav tribunal's investigations into alleged crimes? Will my hon. Friend undertake that the British Government will consistently take a lead in making it clear to those who commit crimes against humanity—such as torture, murder and the taking of hostages—that they will find no hiding place anywhere in the civilised world?

Mr. Lloyd: We deplore the fact that President Milosevic has so far refused to co-operate with the international criminal tribunal on Yugoslavia, particularly with respect to Prosecutor Judge Arbour's desire to investigate recent events in Kosovo. There is no doubt that, under Security Council resolutions, he is as much liable to co-operate with the tribunal as he is to play a constructive role in, for example, political dialogue with the Kosovo Albanians or in humanitarian relief. That is not negotiable. The international community will continue to insist that the tribunal's work should not be interrupted by Milosevic or by any of those acting in his name.
On the more general issue, the clearest signal that we can give of the need for international justice in the modern world is the fact that yesterday the permanent representative of the United Kingdom at the United Nations signed the international criminal court's treaty, which means that Britain has committed itself to the long process of ratification of the treaty and to it becoming an effective instrument against the Milosevics, Pol Pots and Saddam Husseins of the future.

Mr. Geoffrey Clifton-Brown: Does the Minister think that, if crimes against humanity are to be dealt with, an international criminal tribunal is the way forward, whether for Yugoslavia or Rwanda? Would that not also be the correct way to view crimes against humanity in Chile? Should not the former President Pinochet be allowed to return to Chile so that the Chilean authorities can prosecute him, if that is their wish? Should there not be a properly constituted international court if such crimes are to be dealt with?

Mr. Lloyd: I shall pass over the inconsistency in the hon. Gentleman's comments. Of course we support the internationalisation of the process. That is why, as I told the House, Britain signed the documents relating to the international criminal court yesterday in New York. That is an important step forward in the internationalisation of justice and a strong signal to the Pinochets of the future that their actions will not be tolerated anywhere on this planet. However, the hon. Gentleman knows as well as I do that, at present, responsibility for Mr. Pinochet lies with my right hon. Friend the Home Secretary, who will make his views known in the fulness of time.

Private Military Companies

Mr. Andrew Mackinlay: What assessment he has made of the impact of the activities of private military companies operating wholly or in part from the United Kingdom on the implementation of UK foreign policy objectives. [61394]

The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): Our concerns relate principally to private military companies which are involved in the supply of military equipment or other controlled goods and services in breach of the UK's national commitments, or which supply, or offer to supply, mercenaries or related military services. The activities of such companies could have—and, in some cases, clearly would have—an adverse impact on the implementation of the Government's foreign policy objectives.

Mr. Mackinlay: Is not one of the lessons of the Sandline affair that such private mercenary companies can cause acute embarrassment to the UK? Many people in this country find it repugnant that private military firmsmercenaries—can operate in the UK. Will my hon. Friend consider advancing within the United Nations a convention to control and monitor such outfits? Will he also consider bringing legislation before the House of Commons so that we can monitor, control and police those outfits? As we license the sale of arms, why do we not license and control those people who organise armies? It is time that we addressed ourselves to legislating to control them.

Mr. Lloyd: There is no doubt that the Government deplore the action of mercenaries. In a few weeks, I shall meet the United Nations special rapporteur on mercenaries, Mr. Ballesteros, whose mandate is to examine the use of mercenaries as a means of violating human rights and impeding the exercise of people's right to self-determination. That is the usual way in which mercenaries operate.
I must say to my hon. Friend that we have a problem. He referred obliquely to the UN convention on mercenaries, which we think is unworkable for legal reasons. The definition of mercenaries is not one that would get through a British court, and cases would simply fail. We are presently examining with other Departments the experience in South Africa, and in other countries that have looked at the legislative route, to find out what lessons that holds for Britain and whether it would offer a way forward to control those unacceptable activities.

Nigeria

Mr. John Smith: What discussions he has had with EU member states about Nigeria. [61395]

The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): We have frequent contact with our European Union partners about Nigeria, at all levels. In response to the improved political and economic


climate, the EU agreed a new common position on Nigeria on 1 November. That lifts most of the measures that had been in place since 1993. It will be reviewed no later than 1 June 1999, with a view to lifting the sanctions once the democratically elected civilian Government are installed. A copy of the text has been placed in the Library.

Mr. Smith: I am grateful to my hon. Friend for that reply. While I recognise the role that Britain has played, and is playing, in ensuring a return to democracy in Nigeria, can he assure the House that he, in conjunction with our European partners, will ensure that the Government do everything they can to make sure that next year's elections in Nigeria are successful?

Mr. Lloyd: There is no doubt that the electoral process, which kicks off this weekend with the local elections, is a seminal moment in the modern history of Nigeria. All Nigeria's friends would recognise that. Britain has been as closely involved as any friendly country, and we have been entirely supportive of the practical steps taken by the Head of State, General Abubakar, in moving his country towards a properly democratically elected Government. We will continue to support that process. Clearly, the House would also expect us to be vigilant to make sure that those who would derail the process are deterred from that. We want a civilian president and a civilian Government.

EU Enlargement

Mr. Dennis Skinner: When he expects to meet other EU Foreign Ministers to discuss enlargement. [61396]

The Minister of State, Foreign and Commonwealth Office (Ms Joyce Quin): My right hon. Friend the Foreign Secretary and I will attend the General Affairs Council in Brussels next Monday, which will discuss enlargement.

Mr. Skinner: Now that Germany is beginning to throw its weight around again, does it not worry my right hon. Friend the Minister, and other Ministers on the Treasury Bench, that some of the countries that are due to become applicants for the Common Market could be little more than satellites of Germany, based upon the fact that, geographically and in trading and economic terms, they are much nearer to Germany than to Britain?
There has been a position that has been long held—it was evinced by Mrs. Thatcher—that more countries joining the Common Market would result in its weakness. There is a possibility, now that the position is changing on the continent, that the opposite could be the case. The net result for our Chancellor of the Exchequer—whom we want to use his veto on any harmonisation of tax plans—could be that more qualified majority voting is the order of the day because of those satellite countries.

Ms Quin: Having talked with many of my counterparts in the countries that are applying to join the EU, I am conscious that they are proud that they now have their independence and that they are in an era that is different from the domination that they had to endure during the

cold war. They are not keen to become satellites of any country, but they are keen to participate in the European Union of the future.
My hon. Friend mentioned trade, which is an important aspect. Germany is probably the country that does most trade with those countries, but I am keen for Britain to improve its trade—both exports and imports—with them. It is important for us to work closely with them in the years ahead leading up to the enlargement of the EU.

Mr. Patrick Nicholls: Can the Minister say what effect enlargement will have on the work reported in this week's edition of The Week, which says that "valuable progress" has been made in regard to tax competition? It especially commends the work of the committee chaired by the Financial Secretary to the Treasury, which has been considering measures to bring about "tax levels significantly lower" than those applying in other countries.

Ms Quin: I, too, pay tribute to the work of the committee chaired by my hon. Friend the Financial Secretary, especially its efforts to tackle the tax evasion and competition that damage industry and chances of employment. I also applaud my hon. Friend's work in respect of the code of conduct, and on the way in which she has chaired the committee.

Mr. Robert N. Wareing: Will next week's discussions include Cyprus's application to join the European Union? What has been the attitude of the Foreign Secretary's counterpart in the EU to that application, given that the Turkish Cypriots do not wish to take part in the negotiations?

Ms Quin: The position on Cyprus is as outlined in a recent debate in the House. The Government feel strongly that the application should be supported and that it should be seen as an important catalyst in the efforts to bring about reunification of the island and a settlement of its problems. We believe that that view is shared throughout the European Union. We want to make progress with the application, while at the same time promoting efforts—including those of the United Nations—to bring about reunification in a way that will give both the Turkish and the Greek Cypriot communities a sense of security and financial and economic prosperity for the future.

Miss Anne McIntosh: The Minister has emphasised the importance of trade with the applicant countries. Does she share my concern about rumours currently circulating in Brussels that the Czechs, Hungarians and Poles will unilaterally operate outside the Europe agreement, reject preferential rates of duty on exports of pigmeat from the European Union and apply the higher rate of duty within the World Trade Organisation? Will the Government take action in European circles to quash such moves?

Ms Quin: I am always reluctant to respond to rumours, but there are many ways in which those issues can be discussed with the applicant countries. We meet them regularly, and when we do so we discuss a range of trading issues with the aim of achieving a fair balance between the interests of the European Union and the very real interests of the applicant countries.

Indonesia

Jane Griffiths: If he will make a statement about the United Kingdom's relations with Indonesia. [61398]

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): We have substantial bilateral ties with Indonesia. We look forward to continuing to work with the Government of Indonesia in their efforts to bring about peaceful democratic reform and economic recovery.

Jane Griffiths: What steps are the Government taking to help Indonesia with political reform? What assistance will they offer the Indonesian Government in that regard and also to support the Indonesian economy?

Mr. Fatchett: We have encouraged the process of democratic reform because we think that it is the only way in which to build a new, stable Indonesia and to bring about economic recovery. When I was in Indonesia last month, I told President Habibie that we would help it to introduce democratic reforms, either bilaterally or through the European Union, by working on the procedures for elections. President Habibie acknowledged the nature of the offer, and I think we can say that we can look forward to working with the Indonesian Government on those issues and on human rights. I recognise, as does President Habibie, that progress can be made only through democratic reform.

Ron Arad

Mr. Frank Roy: What assessment he has made of the whereabouts of missing in action Israeli airman Ron Arad. [61400]

The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): There is no conclusive evidence of the fate of Ron Arad. We cannot be sure where he is, who is holding him or, indeed, whether he is still alive. I met the family of Ron Arad when I visited Israel in January. It is important that the missing service men are not forgotten.

Mr. Roy: I thank my hon. Friend for his answer. Ron Arad was captured in the Lebanon in 1986—12 long years ago. While encouraging the more moderate elements of the Iranian Government, when my hon. Friend next speaks to that Government, will he ask them what they know about the whereabouts of the airman and the other Israeli service men who have been missing since the early 1980s? I am sure that he agrees that 12 years is a long time for families not to know the whereabouts of their loved ones.

Mr. Fatchett: I have no difficulty in agreeing with my hon. Friend. When I met members of Ron Arad's family earlier this year, I could see the suffering that they had undergone over all those years. We will take every opportunity to raise the issue with anyone who can provide information on the whereabouts of Ron Arad and other missing service men.

Points of Order

Mrs. Theresa May: On a point of order, Madam Speaker. I wish to seek your guidance on a statement that was made by the Minister for School Standards to hon. Members in a Standing Committee, and on the record of that statement. I have informed the Minister of this point of order.
On 18 November, in the Eighth Standing Committee on Delegated Legislation debating the Education (Infant Class Sizes) (England) Regulations, I referred to the fact that the regulations had been laid and had come into force during the parliamentary recess, thus ensuring that there could be no debate on them before they came into force. The Minister responded by saying that I should have spoken to Baroness Blatch, as the regulations had been announced on 27 April and discussed in the other place on 5 May. Column 21 of the Official Report of that Standing Committee debate refers to those statements.
I have spoken to Baroness Blatch. She has made inquiries in another place into the matter and I gather that the Minister's statement was false. The regulations were not announced on 27 April and were not discussed in the other place on 5 May. Indeed, I understand that, as the primary legislation was still going through the House, it would not have been possible to discuss the regulations, which were in the form of secondary legislation.
The Minister's comments to the Standing Committee were obviously misleading; I can assume only that she was given incorrect information by her officials. Madam Speaker, I seek your guidance on how the record on the matter can be set straight.

Madam Speaker: Neither I nor any occupant of the Chair in Committee can be responsible for the accuracy, or otherwise, of ministerial statements. I refer the hon. Lady to the Order Paper. Perhaps she will find ways of pursuing the matter. I am afraid that, in this instance, I cannot help her. I am not responsible for ministerial statements.

Orders of the Day — Debate on the Address

[SIXTH DAY]

Order read for resuming adjourned debate on Question [24 November],
That an humble Address be presented to Her Majesty, as follows:—
Most Gracious Sovereign,
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. Ashton.]

Question again proposed.

Orders of the Day — The Economy

Madam Speaker: We now come to the main business. I have selected the amendment standing in the name of the Leader of the Opposition. Just after 10 o'clock, I shall ask for the amendment standing in the name of the right hon. Member for Yeovil (Mr. Ashdown) to be moved formally. I have had to impose a 15-minute limit on speeches by Back Benchers between the hours of 7 and 9 pm.

Mr. Francis Maude: I beg to move, as an amendment to the Address, at the end of the Question to add:
But humbly regret that the Gracious Speech contains no proposals to save jobs or help businesses, but instead continues the policies that are pushing Britain's economy into a sharper downturn than is forecast for any other major EU economy; call on the Government instead to pursue policies of maintaining Britain's competitiveness by reversing its proposals which increase costs on business and to return to the policies conducted by the previous Government which left a golden economic legacy of low inflation, steady and sustainable growth and falling unemployment; and also urge the Government to make a clear statement of its position on the question of European tax harmonisation.
The second Session of any Government should be a period of maximum purposeful activity. The Government have had the chance to play themselves in, to prepare major plans and to act in a genuinely long-term way. Instead, they have squandered the opportunity to make real and needed changes and to make genuine improvements to health and education; most reprehensibly of all, they have missed the chance to mitigate the effects of the economic downturn that Britain now faces, a downturn that was triggered by the Government's blunders and will be prolonged and deepened by their refusal to recognise their mistakes.

Mr. James Plaskitt: Will the right hon. Gentleman give way?

Mr. Maude: In a little while.
The House will be surprised that the Chief Secretary to the Treasury has been entrusted with the debate. Last time he led for the Government, he got into seriously hot water for using his speech to bully the Bank of England's Monetary Policy Committee. "Major gaffe," the newspapers reported. "Chief Secretary on the Chancellor's carpet," they said, so it is surprising that the Chancellor of the Exchequer has let him out again.
That is why we have heard so much from the Economic Secretary to the Treasury recently. This is the first Treasury event in the House for some time that has not been fronted by her. She is the Minister who steps in where her colleagues are forbidden to tread.

Several hon. Members: rose—

Mr. Maude: I am overcome with these blandishments, but I give way to my hon. Friend the Member for Arundel and South Downs (Mr. Flight).

Mr. Howard Flight: I thank my right hon. Friend. The Government have become control freaks to such an extent that they seem to

have circulated to Opposition Members their 10 questions to ask the shadow Chancellor today. To help them on their way, may I begin by asking the shadow Chancellor
why he is opposing the extra £40 billion for our public services
that the Government have guaranteed?

Mr. Maude: The House will be grateful to my hon. Friend for saving a Government Back Bencher the trouble of having to read out that prepared intervention. As he knows, of course we are not opposing £40 billion extra for health and education. We are opposing the Government's failure to implement their own pledges on welfare reform, and their reversal of the fall in welfare spending as a proportion of national income spending, putting it back on an upwards path.

Mr. Plaskitt: The right hon. Gentleman, within seconds of starting his speech, used the word "downturn". May I draw his attention to paragraph 9 of the minutes of the Bank of England's Monetary Policy Committee meeting of November 4 and 5, which state:
the tone of some public comment had moved from predicting a slowdown through a downturn ߪ That was extreme"?
Is the right hon. Gentleman satisfied to have joined the extremists?

Mr. Maude: The hon. Gentleman is off-message already, showing dangerous signs of thinking for himself. This may be shattering news to him, but the Treasury's own figures and the consensus view of outside forecasters demonstrate disbelief in the Chancellor's comments on the course of the economy. Outside forecasters are predicting a downturn. Although the hon. Gentleman undoubtedly thinks that he knows better, the Bank of England, the Confederation of British Industry and the Organisation for Economic Co-operation and Development do not believe the Chancellor's forecast. The hon. Gentleman may believe the forecast, but that may say more about him than it does about the others.
The Chief Secretary to the Treasury is standing in today for the Chancellor. It is surprising that he has been allowed out on his own, but probably every other Treasury Minister is too busy harmonising. The Financial Secretary to the Treasury is busy chairing the European Union code of conduct on harmonising business taxes in the European Union. The Chancellor is even busier today, at the Economic and Finance Council, harmonising other taxes. It is lovely to see the Paymaster General in the Chamber—welcome back to him. He is busy deciding how to harmonise his business past with the requirements of the Companies Acts and of the House.

Mr. Christopher Leslie: On a point of order, Madam Speaker. Earlier today, I was looking at page 421 of "Erskine May", which states:
In debate a Member is required to declare 'any relevant pecuniary interest or benefit of whatever nature, whether direct or indirect, that he may have had, may have or may be expecting to have'.


I notice, from the Register of Members' Interests, that the right hon. Member for Horsham (Mr. Maude) said that he undertakes remunerated advisory work for Morgan Stanley investment bankers. As we are debating the economy, should he not have declared that interest at the beginning of his speech?

Madam Speaker: I cannot deal from the Chair with an interest if an hon. Member has already declared it in the Register of Members' Interests.

Mr. Tony McNulty: Further to that point of order, Madam Speaker.

Madam Speaker: I have dealt with it.

Mr. Maude: The hon. Member for Shipley (Mr. Leslie), in his slavish desire to ingratiate himself with his masters, gets it wrong again. I stated in the Register of Members' Interests that I may from time to time undertake such work. He will be delighted and reassured to know that I have not done so. He has therefore missed the mark once again, as we are coming to expect from him.
We support some things in the Queen's Speech. As my right hon. Friend the Leader of the Opposition said last Tuesday, we welcome partial privatisation of the Commonwealth Development Corporation. It will now become free to build on the valuable work that it has done previously with developing countries without being hamstrung by Treasury rules. Of course we welcome the conversion of the Secretary of State for International Development to the idea of privatisation and look forward with keen anticipation to hearing her arguing the case.
I should now like to say a word about the financial services and markets Bill. Let me reassure the hon. Member for Shipley (Mr. Leslie) that I am on the boards of two companies that will fall to be regulated under that measure. Those interests are fully disclosed in the Register of Members' Interests. There is, therefore, a serious danger of my knowing something about the subject.
The financial services industry is a British world-beating success story. Having it properly regulated so that the confidence of investors that their interests are adequately protected is not outweighed by the costs and burdens of the regulatory system is crucial, but the Government's handling of the Bill has been lamentable. They rushed clumsily into their plans last May, renaming the Securities and Investments Board and nearly precipitating the resignation of the Governor of the Bank of England. Having created turmoil, they then took 14 months to produce a draft Bill, which is quite simply a mess and has been widely criticised. It gives sweeping and ill-defined powers to the Financial Services Authority and probably breaches the European convention on human rights. It threatens huge extra compliance costs for firms, leading to more expense for savers and weakening the competitive position of the City in international markets.
The Bill ran into a hail of opposition and criticism and the Government now admit that it cannot be introduced in anything like its present draft form. The Chancellor blames the instability of the global market on the lack of proper regulation, yet at home he cannot produce a Bill on time. The Financial Services Authority continues to

operate without proper statutory cover and there is continuing uncertainty and alarm in the City about the powers, scope and structure of the Government's regulatory regime.
We shall be constructive in our criticism in order to get a better Bill on the statute book. We do not see the need to delay the Bill further into the next Session and we do not agree that it is appropriate for the carry-over procedure.

Ms Sally Keeble: The right hon. Gentleman has declared his jobs in the sector which clearly give him an understanding of it, but does he accept that his interpretation will be from the producer side and not from the consumer side? He should not forget that the Bill aims to protect consumers and investors and to regulate the market.

Mr. Maude: The hon. Lady misses the point that consumers have an interest in investment products being made available competitively in a way that gives them free choice. Consumers are not served by a system that places such heavy costs on the financial services industry, as they will suffer from a lack of choice and excessive costs. In this, as in any other sector, the cost of over-heavy regulation eventually falls on the consumer, as the hon. Lady ought to understand.

Mr. Geraint Davies: How does the right hon. Gentleman square his argument for clarity in the regulatory regime with his declared view on the media that the Bank of England is either too independent or not independent enough? Which should it be—independent or not?

Mr. Maude: The hon. Gentleman has done well. He has skipped one to nine and gone straight to 10. It is a pretty feeble question and he has asked it several times. The Chancellor of the Exchequer could not answer that question until three days after the election. I am not prepared to answer it three years before the next election.
The economy should dominate the Government's thoughts and actions as Britain stands on the brink of the most severe downturn—[Interruption.] I am using that word—anywhere in Europe and north America. Incredibly, at a time when people's jobs and businesses are on the line, the Queen's Speech contained not a single measure to make it easier for anyone to get a job.

Mr. Steve McCabe: rose—

Mr. Maude: I am going to make some progress now.
By their decision not to include even one Bill that would make it easier for people to get a job or keep the one that they have, the Labour Government have made their priorities abundantly clear to the whole country.

Mr. Dale Campbell-Savours: Perhaps I can further develop No. 8 on the list. The right hon. Gentleman cannot say that he does not know the answer, because he has been given notice of the question. Constituents of mine have asked me to ask the right hon. Gentleman a simple question. They say that they earn very low pay and are pleased that, after all these years, a Labour Government are introducing a national minimum


wage. The Conservatives want to block that and then remove it, I understand. Will the right hon. Gentleman confirm that, at the next general election, the Conservative party will stand on a platform of ending the national minimum wage and reducing the pay of many thousands of people in my constituency—yes or no?

Mr. Maude: I have a high regard for the hon. Gentleman and I am sorry that he could not think of his own question instead of taking a handout from the Whips. The Leader of the Opposition said:
I think it would in fact be very foolish, and most people in the party accept it, if the party started writing its … plans now.
That was the Leader of the Opposition—in 1995.

Mr. Campbell-Savours: I have not asked what we said; I have asked the right hon. Gentleman what he thinks and what the Conservatives believe. Will their policy at the next election be to end the national minimum wage? If so, let us have a yes or no answer now, with no dithering.

Mr. Maude: I admire the hon. Gentleman's persistence, but what was good enough for the then Leader of the Opposition, now the Prime Minister—[Interruption.] Labour Members are very much out of order now. They are criticising their leader. It is not acceptable for him to have said that he would not announce his plans then. That is what he said in 1995, but it is not good enough for them. I am surprised that they did not express their criticism at the time.

Dr. George Turner: The amendment on the Order Paper, for which I assume that we are asked to vote, calls for a
return to the policies conducted by the previous Government".
Surely the right hon. Gentleman will tell us to which policies he wants to return. Does he mean abolishing the changes that have taken place under this Government, such as the minimum wage? How can he expect the House to vote for a motion if he will not tell us what it means?

Mr. Maude: The amendment means returning to policies that created high growth, low inflation, falling unemployment and rising living standards.

Several hon. Members: rose—

Mr. Maude: It is a delight to see so many Labour Members wanting to intervene. I do not know whether all their pagers went off at once to make them all spring up at the same time. Perhaps they are being given a new line that has not yet been printed.

Ms Helen Southworth: Does the right hon. Gentleman want to return to one of the dearly held policies of the past—interest rates of 15 per cent?

Mr. Maude: That is No. 6. I shall let the hon. Lady into a secret: her party is in government now; we ask the questions.
Although the CBI reports that business confidence is at an all-time low, Government complacency is at an all-time high. Every time a Labour Back Bencher stands up to intervene, their arrogant complacency and refusal to answer basic questions about the Government's policies illustrate my point.

Several hon. Members: rose—

Mr. Maude: I want to make a little progress now. I have been very generous in giving way and I think that we have almost gone through the list of 10 questions.

Mr. Ivan Lewis: rose—

Mr. Maude: Perhaps the hon. Gentleman will ask the remaining questions together, which would save time.

Mr. Lewis: The right hon. Gentleman cannot define the policies to which he wants to return because, at general elections, the electorate vote primarily on economic competence. The reason for the biggest landslide in living memory on 1 May 1997 was primarily the Conservative party's economic record of boom and bust. That is why the British people will not allow the right hon. Gentleman back into office to implement his policies.

Mr. Maude: I think that the hon. Gentleman could have done a better job in clearing up the remaining questions. Again, I quote what the Prime Minister said when he was Leader of the Opposition:
I don't believe people do expect us to say well by such and such a date there will be X hundreds of thousands of jobs, we will tell you exactly what the minimum wage is now, we'll write our budget in advance of getting into power".
If that was good enough then, it should be good enough now.

Several hon. Members: rose—

Mr. Maude: I am going to make progress.

Dr. Nick Palmer: On a point of order, Madam Speaker.

Madam Speaker: I think that there will be a point of frustration if the hon. Gentleman is not able to intervene.

Dr. Palmer: I am puzzled as to why the right hon. Gentleman is unwilling to deal with the points in the motion that he tabled. As a new Member, I am not clear whether it is in order for him to refuse to address the points in a motion that he tabled.

Madam Speaker: That is not a point of order.

Mr. Maude: I have been keen to give all Labour Members the opportunity to ask the prepared questions to earn their colours and to ingratiate themselves with the control-freak tendency, but I think that the patience of the House will soon diminish if that process continues.
The arrogant complacency—[Interruption.] Every response that Labour Members make and every note in their braying voices illustrate their arrogant complacency and their refusal to accept that there are any problems.

Dr. Desmond Turner: Will the right hon. Gentleman give way?

Mr. Maude: No. I have said that I propose to proceed.
The Government have blamed everyone but themselves for the economic downturn. They have blamed the Asians, the Russians, Britain's managers and greedy workers; the Chief Secretary has blamed the Bank of England. No one can pretend that Britain is immune from international economic difficulties, but global turbulence makes it doubly important that policies are right at home. Britain's economy started to turn down before the Russian and Latin American problems surfaced. Most countries around the world are not sliding towards recession, yet every day there is more evidence that things are going wrong in Britain.
The CBI survey shows that confidence in the service sector is slipping yet further. The Institute of Purchasing Management monthly survey shows that manufacturing output has fallen at its sharpest rate for seven years and that manufacturing industry has contracted for eight consecutive months. Is it any wonder that barely anyone believes the Chancellor's fantasy forecasts for economic growth? The Bank of England does not believe him, nor do the CBI or the Organisation for Economic Co-operation and Development—

Mr. Martin Salter: Will the right hon. Gentleman give way?

Mr. Maude: No. I am going to make progress.
Even a Treasury publication shows that the consensus of outside forecasts is well below the Chancellor's forecast—for next year, the year after and the year after that. Only a handful of old faithfuls, headed by the chief economist at the Trades Union Congress, believe the complacent nonsense that the Chancellor hands out.
The downturn was triggered by Government policy blunders and has been prolonged by their refusal to acknowledge the problems that they created. They made four basic blunders: the reckless spending spree—

Several hon. Members: rose—

Mr. Maude: I think that Labour Members are all on question No. 2, which I have already answered. Social security spending is set to increase by £37 billion over the next three years, which is almost as much as the increases in health and education spending put together.

Mr. Derek Twigg: rose—

Mr. Maude: The Labour party committed itself in its manifesto to cutting social security bills and the Prime Minister said the same immediately after the general election. Perhaps the hon. Gentleman will explain what went wrong. Why has the Prime Minister's clear pledge in absolute terms to cut social security bills resulted in an increase in social security spending of £37 billion?

Mr. Twigg: The right hon. Gentleman has been asked this question many times. Will he tell us what the Conservative party would cut out of the £40 billion if they were in government?

Mr. Maude: None of it. We have said so many times. I am sorry that the hon. Gentleman could not answer my question, which was: what went wrong with the Prime

Minister's clear pledge to cut social security bills and how has it turned into a £37 billion increase? He cannot answer it.
The second blunder was the attack on savings, which fuelled spending and kept interest rates higher than they need have been, and the 17 tax rises, which have stoked inflation and put up interest rates. The Government have piled new costs on to businesses when they are least able to cope. Interest rates are higher than they need be and businesses are less able to withstand the downturn. What of the £40 billion in extra taxes and costs—no less than £1,500 per person employed?

Mr. Salter: rose—

Mr. Maude: I will not give way, as I must make some progress.
The Government's measures are also boosting inflation, as the Bank of England has said. The problems in the economy are getting worse and the Government simply will not accept them. Their new favourite topic is productivity. The Prime Minister, like the Chancellor and the Secretary of State for Trade and Industry, without a day's—

Mr. Barry Sheerman: rose—

Mr. Maude: I will not give way. I intend to make progress.
The Prime Minister, the Chancellor and the Secretary of State for Trade and Industry, without a day's business experience between them, have even had the impertinence to lecture business. The Prime Minister has said, "Be honest. Your fundamental problem is not high interest rates or a high pound; it is too few first-class managers." There is Labour's scapegoat, productivity and bad management.
What does the Chief Secretary to the Treasury think that the chairman of BMW meant—I raised this in our last debate on the subject, but did not receive an answer—when he said in 1995:
Great Britain is currently the most attractive country among all European locations for producing cars"?
What has changed since then? Now, BMW is having to be bribed by the Department of Trade and Industry to keep Longbridge open. It is the same plant, management and work force, but a different Government, and that is what has changed. They are a Government who have increased costs on business and made productivity worse. That is why barely a day goes by without more jobs lost and more business failures—[Interruption.]

Madam Speaker: Order. The right hon. Member for Horsham (Mr. Maude) has made it clear that he will not give way for a while, so hon. Members should not persist in trying to intervene for the time being.

Mr. Maude: Last Friday—black Friday—no fewer than 4,200 job losses were announced, including job losses in BMW, which was lauding Britain's productivity to the skies barely three years ago. Today, it has been announced that 1,250 jobs are to go at Courtaulds Textiles. That is what is going on in the economy. The Government should admit it and take steps to mitigate the effects.
The Queen's Speech was curiously silent on another important subject—

Several hon. Members: rose—

Mr. Maude: No. I am making progress. The Speech contained much about the Government helping to prepare the European Union for historic challenges—talk of working with European partners to promote economic reforms and of preparations for the introduction of the euro—but nothing about the principal European issue of the day. If it were not so damaging to the country, a certain innocent pleasure could be had from the spectacle of the Chancellor tying himself in ever-tighter knots over European tax harmonisation. On that issue, as on so many before, the Government are trying to have it both ways and to be all things to all men.
When the right hon. Gentleman is in Britain, he says that tax harmonisation is not the way forward for Europe and that Britain's tax decisions will be made in Britain. However, according to "The New European Way", which he has signed and which, apparently, was not drafted a million miles away from him,
We must make further progress in tax and benefit reform by co-ordinating savings and corporate taxation.
In Britain, he says that no one is proposing any change in value added tax, but the European Commission has published a policy document entitled "A Common System of VAT", which states that the present system has to be replaced and advocates the abolition of the VAT-free circulation of goods, so there is such a proposal.

The Chief Secretary to the Treasury (Mr. Stephen Byers): I regret the fact that the right hon. Gentleman did not read out the paragraph to which he referred, because he omitted some important words. For the record, I draw his attention to the words that he missed out. The document clearly states:
We must make further progress in tax and benefit reform to help safeguard and create jobs in Europe by implementing an effective code of conduct.
I regret his failure to mention why that was necessary.

Mr. Maude: I am grateful to the right hon. Gentleman for amplifying and confirming my point: there is a clear commitment in Labour policy documents to taking further a process of tax co-ordination and harmonisation that can only increase Britain's taxes to continental levels.

Mr. Paul Marsden: Will the right hon. Gentleman give way?

Mr. Maude: I am not giving way now, but I shall in a little while.
In Britain, the Chancellor says that the central issue for Europe is not tax harmonisation. However, Mr. Monti, the European tax Commissioner, says:
As far as taxation is concerned, we have the UK fully on board.
The Government cannot continue to have it both ways. Why cannot the Chief Secretary make an unequivocal statement on where the Government stand? The

Government seem to inhabit a parallel universe, where they have not done what they have done and where they did not say what they said.
I would like the Chief Secretary to answer three key questions. First, does he agree with his colleagues on the continent that the single currency will tend to lead to tax harmonisation? The German Finance Minister thinks so. Mr. Lafontaine said:
It is necessary to harmonise tax policy. A unified currency area needs a fair and equal tax framework.
The Austrian Finance Minister thinks so, too. He said:
EMU will make it imperative to start co-ordinating the sphere of taxation. The Social Democrat Governments will also have to look at harmonising price and wage policy.
The French Finance Minister thinks so. He is confident about it; I do not know who has been tipping him the wink. He said that Britain would be
won round to tax harmonisation by the end of the German presidency
in the middle of next year.
That is what the Chancellor's continental colleagues think. They have a clear opinion on the issue. What does the British Finance Minister think? Does he agree with them that the road to economic and monetary union also tends to lead to tax harmonisation—yes or no? A simple nod or shake of the head will do. The Chief Secretary nods; he agrees. [Interruption.] He is being particularly helpful and illustrates my point perfectly. Asked whether he agrees, first he nods and then he shakes his head.

Mr. Byers: The right hon. Gentleman will have to wait for my speech, in which I shall address specifically the questions that he has raised in his.

Mr. Maude: It is all things to all men: a nod one moment, a shake the next; yes to one side, no to the other. No wonder the Government are in chaos.
I come to my second question. If the Chief Secretary cannot comment on the proposals from Europe—we wait with keen anticipation to hear what he will say—perhaps he can comment on Labour's policy paper. This revealing document states:
The single currency is bound to lead to closer integration in some areas for those member states that participate, though Labour believes member states must retain their own control over public spending levels and personal tax rates.
What about the rest? Why is it Labour's policy only to protect personal tax rates? What about business tax rates, savings rates, savings taxes and stamp duty? Are they all up for grabs? Is the game up already?

Mr. Paul Marsden: Will the right hon. Gentleman give way?

Mr. Maude: I would give way to the Chief Secretary if he were prepared to answer my question. The Prime Minister has done the same thing and protected Britain's position on personal taxes only, with everything else left up for grabs. Will the Chief Secretary explain why? if he cannot, will he answer my third question and give us some


guidance on specific taxes? Will he give a binding commitment not to raise Britain's rates of stamp duty on house purchases to the level of our partners?

Ms Keeble: Will the right hon. Gentleman give way?

Ms Claire Ward: Will the right hon. Gentleman give way?

Mr. Maude: I will give way to the Chief Secretary if he wishes to respond to my question. Will the rate be raised to the level of our partners—yes or no? He could again shake his head, nod or do both as before; at least we would have some idea. Will he veto the imposition of the withholding tax on savings, which will put 10,000 jobs at risk in the financial services industry? Will he use the veto to protect Britain's rates of value added tax—yes or no? Will he veto any European energy taxes—yes or no? Will he veto the harmonisation of corporation tax—yes or no?
Perhaps the most ridiculous spectacle of all is cut by the Financial Secretary to the Treasury. In Britain, she introduced a tax break for the British film industry; we were told that it was a flagship measure, designed to promote employment, investment and opportunities. The hon. Lady and her friends were pretty pleased with themselves, but they reckoned without the chairperson of the European Union working group set up to eliminate harmful tax competition, who is busy clamping down on unfair tax breaks to particular industries, such as film making. The chairperson of the working group will come to the Treasury to demand action from the Financial Secretary and there will be an angry confrontation.
Who will win that battle of the titans? Will it be the chairperson of the working group, or the Financial Secretary? Well, it turns out that they are one and the same person. The hon. Lady is going to face herself across the table, look herself in the eye and tell herself that such tax breaks are totally unacceptable and must be stopped immediately. Will she face herself down and insist on fighting for Britain's tax sovereignty against her European alter ego? Will she keep in with Britain, or cave in to Europe? Will she stand up for Britain, or speak up for Europe? The choice is hers. The Government are split down the middle and the Financial Secretary is as well.
The Government are spinning out of control, saying one thing one day and another the next. Yesterday, in a story in the Financial Times which was clearly briefed from No. 10, the Prime Minister was all for some tax harmonisation. It said:
There is a growing realisation among ministers that some forms of tax harmonisation in the EU could be beneficial to the UK … Tony Blair, the Prime Minister, has instructed officials that they should not dogmatically oppose all EU tax initiatives.
It continued:
the government is determined not to block the proposal to impose an EU-wide withholding tax on savings and investments.
That was yesterday, but what about today? On the front page of The Daily Telegraph today, we read:
Tony Blair broke ranks with fellow socialist leaders"—
he certainly would not like that—
last night to open the way for a showdown with France and Germany over their plans for Europe-wide taxes.

Today in The Daily Telegraph the Prime Minister is dead against harmonisation, but yesterday in the Financial Times he was all for it. Which Prime Minister does the Chief Secretary support? Does he support yesterday's Prime Minister, or today's? Perhaps he supports both. Will the real Government at last stand up?
Sometimes, the Government do not even wait until the next day to spin the opposite story. This very morning, some useful light was cast on the Government's attitude to duty free—[Interruption.] Labour Members might want to hear what I have to say, because the issue is of considerable importance to many of their constituents. In the Financial Times today, we read:
Mr. Brown is today expected to offer support to France and Germany over plans to postpone the scrapping of duty-free shopping. At a meeting of EU finance ministers in Brussels, Mr. Brown is expected to back … calls for a five-year delay while the issue is reviewed.
That was reassuring: the Chancellor had read my letter and taken my advice—sensible fellow, we thought. However, we then opened another of today's newspapers and read:
Gordon Brown will back the abolition of duty-free shopping at a meeting of EU finance ministers in Brussels today.
Are the Government keeping duty free, or scrapping it?
The Government are in a mess. They cannot work out where they are heading in Europe. They are fiddling while Britain's economy slides down, refusing in their arrogant complacency to admit that there is a problem facing them. The Queen's Speech is a missed opportunity. I commend the amendment to the House.

The Chief Secretary to the Treasury (Mr. Stephen Byers): There is a common theme running through the measures in the Queen's Speech. That theme is modernisation. For our country, our public services, our system of government and the economy, the status quo is simply not an option. Change must come, as that is what people voted for on 1 May last year. The people had had enough of a Tory Government who were drifting with no coherent programme and who allowed political dogma to triumph over reason and common sense. Judging from the speech that we have heard this afternoon from the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), nothing has changed on the Conservative Front Bench.
The contrast with this Government could not be clearer. We have adopted a pragmatic approach that has allowed us to act in the national interest, not for narrow party political advantage. Our new Labour Government are not an old-fashioned state interventionist Government; nor are we saddled with an equally outdated adherence to the free market. The Government have a new sense of direction that has allowed us to cut corporation tax, introduce a national minimum wage, give independence to the Bank of England, find radical new ways of combating social exclusion, crack down on juvenile crime while launching the most ambitious programme to slash youth unemployment that our country has ever seen, reform student finance and deliver a record increase in the level of child benefit. In this, our second Queen's Speech, we build on our first programme by pushing forward our modernisation agenda.
In our first Session, we delivered no fewer than 52 Acts, including four education Acts—all of which I had the pleasure and the privilege of taking through


Committee. In this more time-limited Session, we are promising nearly 20 Bills. In addition, draft Bills will cover important areas such as freedom of information, the food standards agency and the funding of political parties. Our modernisation agenda is based on fairness and enterprise. The debate since the Queen's Speech was delivered a week ago shows that our principles, values and ideals give coherence to our programme of legislation.

Mr. Nick Hawkins: Will the right hon. Gentleman give way?

Mr. Byers: I will give way when I have finished my introduction.
As we saw this afternoon, the Conservative party wants to turn the clock back. It has no vision for the future—just a return to all our yesterdays. That poverty of ambition for our country has been rejected by the British people. This Government will lead our country into the next century. That carries a heavy responsibility, but we intend to discharge it in the interests of the many, not the few. In doing so, we will tackle those vested interests that stand in the way of the national interest, whether they are ermine-clad hereditaries from the House of Lords or professionals who block the radical reform of our public services.
Several specific proposals in the Queen's Speech are directly relevant to the economy and the financial markets. The shadow Chancellor referred to the financial services and markets Bill, and I wish to say a few words about that important legislation.

Mr. Hawkins: The Chief Secretary talks about fairness. What was fair about the unforeshadowed smash-and-grab raid on people's pensions? How many more taxes—which the electorate certainly did not vote for—will his Government impose on the British people?

Mr. Byers: The hon. Gentleman likes to use phrases such as "smash and grab".

Mr. John Bercow: Answer the question.

Mr. Byers: I will answer in due course. I urge the hon. Member for Buckingham (Mr. Bercow) to calm down, and I look forward to a speech from him in due course. I hope that it will be up to his usual standard—which would be extremely helpful. We believe that our tax proposals are fair and just and that the British people will agree with us.
The financial services industry is a highly successful and important part of the United Kingdom economy. It accounts for 7 per cent. of gross domestic product and employs more than 1 million people. An efficient and effective financial services industry is vital for our prosperity and stability. Millions of people depend on the availability of modern financial services and fair and honest markets and advice. The City of London is one of the foremost financial centres in the world. We are determined to secure the future of the City and financial services in the United Kingdom. We want the UK to be a good place to do business, and that is why we are introducing the financial services and markets Bill.
The Bill will create a single regulator with a single authorisation process, a single compensation scheme, a single ombudsman and a single appeals tribunal. In doing so, it will reduce regulation and provide for greater accountability. The Bill will do away with the increasingly blurred distinction between the nine existing regulators and the complex division of responsibility. The new regulator will have, for the first time, clear statutory objectives and a single coherent set of functions and powers.
Excessive regulation gets in the way of good business and is to no one's advantage. The Bill will therefore provide for the Financial Services Authority to consult on costs and benefits arising from any regulations that it proposes to introduce. There will be a statutory requirement for regulation to be proportionate. The Bill will reduce the potential for confusion and duplication. It will enable the Financial Services Authority to deliver high standards of supervision and investor protection. It will create transparency and fairness for providers and consumers of financial services.
As the shadow Chancellor said, a draft Bill was introduced at the end of July. The consultation process has now ended. In the light of that consultation, we can bring an improved Bill before the House next year. I am keen to learn from experience and I therefore propose to establish in the new year a joint committee of the House of Commons and the House of Lords to scrutinise the Bill before it begins its usual parliamentary process. Our consultation shows that there is strong support for plans to overhaul financial regulation, but I want to ensure that the details are right, and I am sure that the establishment of the joint committee will help us to achieve that. I am grateful to the Treasury Select Committee, which will conduct a short inquiry in December into certain aspects of the Bill.
This is an opportunity for hon. Members on all sides of the House to recognise the need for improved regulation in the City and to join us in ensuring that the Bill is in the best possible form to meet what I hope are our shared objectives.
The Queen's Speech confirmed that a Bill would be introduced for the working families tax credit and disabled persons tax credit. Many people on low income are trapped in poverty. The tax and benefit system stands in the way of people trying to get out of poverty. That trap frustrates ambitions and locks people into poverty. The Government believe that work is the best route out of poverty and a life on benefits. That is why we are introducing measures to help to make work pay: reforms of the tax and benefit system, a national minimum wage and the working families and disabled persons tax credits. The link with the tax system and payment through the wage packet will demonstrate the reward of work over welfare.

Mr. Steve Webb: The Chief Secretary mentioned the centrality to the working families tax credit of payment through the pay packet but, as a concession, it has been agreed that couples can decide whether the person with the pay packet or the person with the children gets the money. If parents opt en masse for payment to those with children, would not his vision be undermined?

Mr. Byers: I think not. The Government have no problem with people being able to exercise choice in this


very important matter. The principle underpinning the working families tax credit is that people can see that work pays. That means going out, getting a job and ensuring that people get more money in work than they would on benefits.
The working families tax credit will ensure that work pays and is not punished. It encourages people to work by allowing them to keep more of what they earn, and it provides two specific guarantees. First, it guarantees a minimum income of £190 a week for families with one member in full-time work earning the national minimum wage. Secondly, families earning less than £220 a week will no longer pay any net income tax. A child care tax credit will also be introduced as an integral part of the working families tax credit, replacing the failed disregard in family credit. It will ensure that no family is denied the opportunity to work by being unable to access affordable, quality child care.
Those measures are part of our radical agenda to modernise the welfare system. They will provide a fairer and better deal for up to 1.5 million families. In its first year, the working families tax credit will give up to £1.5 billion more to those families than would have been available under family credit. The disabled persons tax credit will help disabled people who want to get back to work. It will be more generous than the existing benefit, so ensuring that disabled people can take and keep work.
I understand that the Opposition have made it clear that they will oppose the working families tax credit and retain family credit. The shadow Chancellor said that it was not for him to answer questions. I understand that the decision to abolish the working families tax credit and return to family credit has already been taken. The shadow Social Security Secretary made that announcement in Social Security questions a month ago. Will the shadow Chancellor confirm that that is the Conservative Opposition's policy?

Mr. Maude: Does the Chief Secretary recognise these words:
the whole of the Working Families Tax Credit venture is fraught with great dangers: it offers huge bonuses for dishonesty; it strengthens the employers' hold over working people; it pulls employees into a spider's web of dishonesty and corruption"?
Those were the words of his right hon. Friend the Member for Birkenhead (Mr. Field).

Mr. Byers: They were, and the simple reality is that my right hon. Friend was wrong. It is probably one of the reasons why he is no longer a social security Minister. The working families tax credit will work. I notice that we have had no confirmation of Conservative policy one way or the other from the shadow Chancellor. It is interesting that the shadow Social Security Secretary is on record as saying that the working families tax credit would be abolished, yet the shadow Chancellor cannot say one way or the other. Perhaps he will now.

Mr. Maude: The right hon. Gentleman is getting frightfully excited about this. We have said it so many times that this is one thing on which he is right: we will oppose the abolition of family credit. Does the Chief Secretary remember his right hon. Friend the Prime Minister, when shadow Employment Secretary some

years back, arguing that the introduction of a minimum wage would reduce the cost of in-work benefits? That idea seems to have gone out of the window.

Mr. Byers: I am grateful to the shadow Chancellor for answering a question, confirming that the Opposition would abolish the working families tax credit. I can understand why he feels uncomfortable admitting that; he probably knows the consequences of such a policy. For those 1.5 million people receiving the working families tax credit, it would mean an average tax rise of £17 a week.

Ms Diane Abbott: rose—

Mr. Campbell-Savours: rose—

Mr. Byers: I shall give way to my hon. Friend the Member for Workington (Mr. Campbell-Savours).

Mr. Campbell-Savours: Will my right hon. Friend press the shadow Chancellor again? The shadow Chancellor answered a specific question on policy, telling us what the Conservative position at the next general election would be on the arrangement that we were discussing. Why cannot we get a clear answer on the national minimum wage? If he is prepared on one, why not on the other? Is it Conservative Members' policy to dither, and perhaps even to support us in the longer term?

Mr. Byers: I look forward to the Conservative Opposition's support for a national minimum wage. We may have to wait a long time for that support, but we live in hope.
Later, I shall speak about the national minimum wage and—

Ms Abbott: Will my right hon. Friend give way?

Mr. Byers: I want to make progress. [HON. MEMBERS: "Give way."] I always give way to my hon. Friend, and I shall do so in due course, but I want to make some progress, specifically on the working families tax credit.
If the Conservative Opposition decide that they wish to retain family credit but not working families tax credit, they will go into the next general election with a commitment to a tax increase of £17 a week for the million people who will benefit from the working families tax credit. I look forward to campaigning against the shadow Chancellor on those issues.
I have concluded what I want to say about the working families tax credit. It may be an opportune moment to give way to my hon. Friend the Member for Hackney, South and Stoke Newington (Ms Abbott).

Ms Abbott: The entire House agrees with my right hon. Friend that the best way out of poverty is work, but does he accept that some groups—especially the elderly, and mothers with very young babies—cannot take that route out of poverty? Does he agree with the recommendation of Sir Donald Acheson's report on inequalities in health that the way to bring the elderly and mothers with very young babies out of poverty is to increase the level of benefits?

Mr. Byers: Unfortunately, the Acheson report was published before the announcement of some of the


policies that the Government are introducing. In particular, the large increase that will take place in child benefit will address many of the concerns raised in the report. For the record, the Government's policy is clear. We want work to be available for those who can work, and we want support and help to be made available for those who cannot. Those policies are clear, but we take the view that the way out of poverty for the people whom I represent, and those whom my hon. Friend represents, is work and having a job.
We also need to ensure that work pays. At the moment, for many people in my constituency and throughout the country, work simply does not pay. The working families tax credit will go a long way to ensure that people are not effectively punished financially for going out to work.

Mr. Bernard Jenkin: Will the right hon. Gentleman give way?

Mr. Byers: I must give way to the hon. Gentleman because he used to be Member of Parliament in my mother's constituency, and when I told him that she had managed to recruit several 80-year-olds to the Labour party, he went off to another constituency.

Mr. Jenkin: I fear that the right hon. Gentleman may be a little misinformed; but how comfortable is he, having campaigned before the general election for a reduction in means-testing in the benefits and tax system, now to be presiding over substantial increases in means-testing?

Mr. Byers: I was only slightly misinformed. My mother has not moved; there may have been a boundary change. Anyway, she was very disappointed no longer to be able to lock horns with the hon. Gentleman as her constituency Member of Parliament.
There is no inconsistency whatever between the commitments that we made on welfare reform before the general election, and the proposals and policies that we are implementing, and shall continue to implement.
The Queen's Speech says that we are committed to investing £40 billion in education and health over the next three years. We are able to do so because the Government have been prudent with public finances. We have taken tough decisions and cut borrowing by £20 billion in our first year in office. In the first half of this year, borrowing is £10 billion lower than last year. We have set out our spending plans for the next three years, and among the central features of our new spending regime are built-in margins to cover uncertainties, including the risk of slower growth and its effect on revenues.
I was intrigued by the comments that the shadow Chancellor made this afternoon about the Conservatives' approach to the extra spending of £40 billion for schools and hospitals. He is on the record as saying that our spending plans, which include schools and hospitals, were reckless and foolish. Interestingly, he now seems to be conducting a U-turn on his previous statements. The record will show that, during various interviews that the right hon. Gentleman has given on "Today" and on television, he has said that our spending plans are reckless and foolish. The record is there.

Mr. Maude: I challenge the right hon. Gentleman to produce the transcript of an interview or anything that I have said where I have stated that we oppose the £40 billion extra on health and education. The right hon. Gentleman can send his Parliamentary Private Secretary across to his officials to get them to hunt through the files. I am sure that the right hon. Gentleman would not have made this allegation without having chapter and verse to hand. Let him get them now to prove what he says.

Mr. Byers: I shall write to the right hon. Gentleman with the exact reference. I stand by what I have said. I shall write in my own time.

Mr. Maude: Will the right hon. Gentleman give way?

Mr. Byers: I am not giving way.

Mr. Maude: rose—

Mr. Deputy Speaker(Mr. Michael J. Martin): Order. There can be only one Member on his feet at the same time.

Mr. Maude: On a point of order, Mr. Deputy Speaker. The Chief Secretary has made an assertion which I feel sure he would not have made without having chapter and verse to back it up. It must surely be possible for him to procure that chapter and verse so that we can ascertain whether he is justified in what he says. Alternatively, he can withdraw his assertion. He has the alternative of withdrawing his latest gaffe, if he is man enough to do it.

Mr. Byers: rose—

Mr. Deputy Speaker: Order. The Minister's speech so far has been in proper order, so there is nothing that he needs to withdraw. There is an opportunity for Opposition Members to rebut any case that the right hon. Gentleman has advanced.

Mr. Byers: rose—[Interruption.]

Mr. Deputy Speaker: Order. Let us start as we mean to finish this evening. The hon. Member for East Worthing and Shoreham (Mr. Loughton) should not be making any comments from a sedentary position.

Mr. Byers: We have clearly touched a raw nerve in the right hon. Gentleman. We need to know exactly what Conservative policies are. On spending on hospitals, time will tell whether the Conservatives will support our extra spending on education and health. It is a responsibility that we certainly intend to deliver. It is what the public want and what they will get.

Mr. Phil Woolas: I think that I can answer the point that has been made. The Observer printed an interview with the right hon. Member for Horsham (Mr. Maude) on 22 November. The right hon. Gentleman was asked specifically about cutting spending. The interviewer asked:
But would not cutting spending make the slowdown worse?
The right hon. Gentleman replied:
Fiscal policy cannot be set to a demand regulator.


In a classic exposition of current Conservative policy, the right hon. Gentleman said:
Perhaps I am being very naive about this.
He continued to talk about the so-called black hole. The Observer asked him:
You think, therefore, that you could have lower interest rates if you cut spending?
The right hon. Gentleman replied:
Yes, that is precisely what I mean.
The right hon. Gentleman's policy is clear.

Mr. Byers: There are a number of references that might be prayed in aid. The extra money that we intend to spend on schools and hospitals is not following the old approach of proposing the spending of money for a particular problem and hoping that the problem will go away. In the next fortnight, we shall be publishing public service agreements that will show clearly the improvements that the public will get from the extra money that we shall be spending.

Mr. Nick St. Aubyn: Will the Minister give way?

Mr. Byers: I wanted to move on to Europe, which I know the House has been waiting for. I do not know whether the hon. Gentleman will be very popular if he delays me in moving on to Europe.

Mr. St. Aubyn: The Opposition are concerned about schools and hospitals. Will the Minister answer this question: if the Chancellor of the Exchequer's projections of Government revenue prove wildly optimistic, as many fear, will the Government cut their promises of extra spending on schools and hospitals, or will they increase taxes or raise borrowing? Which will they do?

Mr. Byers: The hon. Gentleman came in slightly late and may have missed my comment that we have built in a margin on the current Budget to cover those eventualities. The £40 billion for schools and hospitals will be spent. I can guarantee that that is a commitment from the Government. [Interruption.] The heckling from those on the Opposition Front Bench suggests that they do not support the extra £40 billion for schools and hospitals, but I shall not delay the House further.
With reference to Europe—an issue that interests many hon. Members—I shall deal with three aspects: the abatement, the single currency and tax harmonisation, which is specifically mentioned in the amendment.
The Queen's Speech states clearly that we will retain the United Kingdom's abatement. That budget rebate from the European Union remains fully justified. Enlargement of the EU does not alter the justification for the abatement, as it will not change the UK's position relative to existing member states. Any proposed changes to the own resource decision requires all member states to agree, and the Queen's Speech makes it clear that we will not accept any adverse changes to the UK's abatement.
On the single currency, we have said clearly that our policy is to prepare and decide, with the final decision being taken by the British people in a referendum. What does the Conservative party think? More specifically,

what does the shadow Chancellor think of the single European currency? Does he believe that a principled position needs to be adopted? His leader said:
I am against a single currency in principle.
Or is he pragmatic about it, as is the Conservatives' deputy leader, who said:
Our instinct is to say, 'Show me it works.' That is the sensible approach, a pragmatic policy based on a hard-headed assessment of the facts"?
How can the deputy leader's approach be reconciled with that of the shadow Chancellor? In the interview in The Observer that was mentioned earlier, when the shadow Chancellor was asked:
What you are saying is that even if the single currency were a success, you could not use that to decide whether or not to join?",
he replied, "Absolutely." It is impossible to reconcile that approach with the view expressed by the Conservatives' deputy leader.
The Conservatives have held a ballot of their party members and have ruled out the single currency for 10 years, even if it is in Britain's national interest to join. However, the Conservatives must answer some fundamental questions. Is their hostility to a single currency based on principle? Is that the position of the shadow Chancellor? Does he believe that, as a matter of principle, joining the single currency should be ruled out—yes or no? He is not answering. If it is a principled position, why not rule it out for ever? If it is pragmatic opposition, how can the Conservatives rule it out for 10 years, even if it is in Britain's national interest?

Ms Keeble: Does my right hon. Friend agree that, given that most of the big financial institutions will be dealing in euros next year, and that many Opposition Members have interests in, or are employed by, those institutions, if those hon. Members were truly principled, they would say whether or not they intend to advise people to deal in euros next year, and to hold euro accounts themselves? They should be honest with the public about the relationship of the financial institutions for which many of them work to the single currency.

Mr. Byers: It will be interesting to see what advice Opposition Members give to their clients in the other jobs that many of them hold.
For the Tories, no decision for a decade is the only option. The single currency reveals a fundamental flaw that divides the Conservative party. As a result, they have adopted a policy that puts party before national interest.

Mr. Jenkin: rose—

Mr. Ian Taylor: rose—

Sir Peter Tapsell: rose—

Mr. Byers: I am spoilt for choice. I am not sure whether to give way to the pro-European wing or the anti-European wing. There are so few pro-Europeans left in the Tory party that I shall give way to the hon. Member for Esher and Walton (Mr. Taylor).

Mr. Taylor: I am grateful indeed to the right hon. Gentleman. I am a pro-European, but the point is that he


is Chief Secretary and the one who has to decide the policy. Can he answer for the Government the question whether this vague intention that they will join if the economic circumstances are right will be translated into positive political will to ensure that Government policy makes the circumstances right for entry? That is the challenge that he has to grasp. The trouble is that, by throwing all the questions around to others, he is evading the central question, to which many business men in this country need the answer.

Mr. Byers: That went down badly with some Conservative Members.
The Government's position is clear, and I know that the hon. Gentleman takes a close interest in matters European. Provided that the five economic tests were satisfied, we would be in a situation in which the Government would consider the position, there would be a decision of the Cabinet and of the Government and then there would be a recommendation. It will be for the British people to decide in a referendum—it will be their decision, and we have made that position absolutely clear.

Sir Peter Tapsell: Will the right hon. Gentleman give way?

Mr. Byers: I want to move on. [HON. MEMBERS: "Give way."] Well, we should have both sides of the argument. Of course I will give way.

Sir Peter Tapsell: Although the Government's five criteria to be met before a referendum are perfectly acceptable—so far as it goes—on the technical side, do not the recent statements by the German Finance and Foreign Ministers make it perfectly clear, as a matter of constitutional practicality, that, if we were to join the single European currency and all that is clearly linked to that, we would cease to be an independent, self-governing, democratic nation state?

Mr. Byers: I do not accept that argument at all, and there are many other people who will agree with me in that position.
On tax harmonisation, I want to address a number of concerns that have been raised, and a good degree of scaremongering that has occurred, over the past few days. I also want to set out the principles that we will apply and apply them to a number of specific cases that have been raised in the past few days.
The Government have made it clear that they will not support any action at European level that will threaten jobs or the competitive position of British business, so any tax proposals will need to pass that acid test. Questions of tax of course require a unanimous decision, so there is no question of tax changes that we do not support being imposed on us by Brussels. The test has to be whether, in any particular case, the proposal delivers economic or financial benefits for the United Kingdom. If it does not, we will oppose it and argue our case. If necessary, we will be prepared to use our veto to protect the national interest.

Mr. Malcolm Bruce: Will the right hon. Gentleman give way?

Mr. Byers: No. I want to make these points.
Having outlined the principles that we will apply, let me consider three areas which have been the subject of recent speculation: value added tax, corporation tax and the withholding tax.
On VAT, let the House be clear that there are no detailed proposals to change the existing rates. We were elected with a clear pledge to maintain zero rates of VAT on food, children's clothes, books, newspapers and public transport fares. The United Kingdom's zero rates are fully safeguarded under existing European Community agreements.
All European Community VAT matters are subject to agreement by all member states. We can therefore guarantee that we will honour our manifesto pledge on VAT, and that VAT on food, children's clothes, books and newspapers and public transport fares will remain zero rated. Unlike the Conservative party, we will stick to our pledge. I remind the House that the Conservatives introduced VAT on domestic fuel and sought to increase it from 8 to 17.5 per cent.
On corporation tax, there are no Community proposals on the table in respect of harmonisation. Indeed, no one proposed minimum rates of corporation tax at today's Economic and Finance Council meeting. The political reality is that harmonisation of corporation tax across Europe is a non-starter. Rates start at 10 per cent. in Ireland and at 28 per cent. in Finland. In the United Kingdom, rates will start at 30 per cent. from next year. In Germany, the rate is more than 40 per cent. It is increasingly being realised that raising corporate tax rates would harm the competitive position of the European Union economy. We would simply not allow corporation tax rates to be raised to the existing levels of some other countries.
On the specific issue of the withholding tax, the motive behind the measure is one that I hope all hon. Members would be able to support—the prevention of tax evasion. It is aimed chiefly at Belgian and German citizens who place funds in the highly secretive banking system in Luxembourg and do not make a declaration to their own tax authorities. The Chancellor called today at ECOFIN for other countries to tackle the problems of banking secrecy.
Having studied the draft directive on the withholding tax, we believe that it is fundamentally flawed. In particular, it would be very damaging to the Eurobond industry. The British Eurobond market has earnings of £5 billion a year and employs nearly 11,000 people. Clearly the withholding tax, as presently proposed, is unacceptable.

Mr. Tim Loughton: Will the right hon. Gentleman give way?

Mr. Byers: No. I want to finish that point.
The Chancellor has made it clear today that exchange of information between banks and tax authorities is a much better solution. We would not accept the directive in its present form, which includes Eurobonds.


The Chancellor has made that clear in Brussels today. If the draft directive is not changed from its present form, we will use our veto to block it.

Mr. Loughton: rose—

Mr. Malcolm Bruce: rose—

Mr. Byers: I shall give way first to the hon. Member for East Worthing and Shoreham (Mr. Loughton).

Mr. Loughton: I am grateful to the Minister for giving way. On that specific point, will he therefore say why Jacques Santer said only last week that the code of conduct meant that Britain could not veto measures such as the withholding tax? Will he also condemn out of hand those members of the European Commission who have been talking about harmful tax competition? When does the right hon. Gentleman think that tax competition is harmful to the interests of the United Kingdom?

Mr. Byers: The position is very clear, as far as the Government are concerned. Legally, the withholding tax is a matter that would have to be decided on the basis of all member states agreeing. Therefore, we have made our position clear and I am happy to confirm it: if the draft directive on the withholding tax remains in its present form, we will veto that directive.

Mr. Bruce: rose—

Mr. John Burnett: rose—

Mr. Byers: I want to make progress. My speech has been longer than I intended.
The Government's approach to Europe is clear. It is far better to be there, shaping and engaging in the debate, than sitting powerless on the sidelines. The issues for Europe are jobs and economic prosperity.

Mr. Bruce: Will the right hon. Gentleman give way?

Mr. Byers: I will give way, for the final time.

Mr. Bruce: I am grateful to the right hon. Gentleman. On the point about jobs and economic prosperity, does he agree—given that the Government are, in principle, in favour of joining the single currency—that the stability pact should allow for flexibility on borrowing for capital purposes in accordance with the established fiscal rules? Does he agree that that would be a beneficial objective—for Europe as a whole and especially for the United Kingdom, given our low borrowing levels?

Mr. Byers: There are issues that need to be addressed in Europe, and we believe that jobs and economic prosperity are the key issues.
In respect of harmful tax practices and tax havens, it is right that Europe should deal with those, but tax—

Mr. Burnett: rose—

Sir Teddy Taylor: rose—

Mr. Byers: I shall not give way; I want to make progress.
I want to make it clear that tax harmonisation is not the way forward. We must deal with harmful tax practices and tax havens.

Sir Teddy Taylor: Will the right hon. Gentleman give way on that point?

Mr. Byers: I will not give way at this stage. Businesses throughout the European Union do not want it—as is shown by a report produced by the European employers federation—and we share their view.
Our agenda for modernisation and reform applies not just to the United Kingdom, but to Europe. For Europe, as for the United Kingdom, there can be no turning the clock back.

Sir Teddy Taylor: Will the Chief Secretary give way?

Mr. Byers: No, I will not.
The shadow Chancellor, as we know, is the man who signed the Maastricht treaty. He is now the man who likes to say no. He says no to the new deal for the young unemployed; 160,000 have entered that scheme, and 30,000 have now found work. He says no to the working families tax credit, which will make work pay for up to 1.5 million of our fellow citizens. He says no to the national minimum wage, which will benefit nearly 2 million people from April.
We need not only listen to the shadow Chancellor. In the early 1990s, the right hon. Gentleman was Financial Secretary to the Treasury. He did not just sign the Maastricht treaty; he did other things as well. During his period in office, interest rates never fell below 10 per cent., and reached 15 per cent. The public sector deficit was rising to £50 billion. This is the shadow Chancellor's record as Financial Secretary: unemployment rose by 1 million, manufacturing output fell by 7 per cent., and inflation rose to nearly 10 per cent.
We are not going back to those bad old Tory days. The Queen's Speech looks to the future; the Tories are stuck in the past. This Government's priority is fairness for all our people; the Tories defend the privileges of the few. We will not be diverted from the real issues that affect the British people: jobs, the economy, crime, schools, hospitals and, yes, our relationship with Europe.
We have established an economic strategy to ensure that we can steer a course of stability in an uncertain and unstable world. Our programme reflects the needs of our people and their aspirations—for themselves, their families and their communities. Together, we can look forward with confidence to the years ahead.

Mr. Malcolm Bruce: Our debates have focused on a Queen's Speech which should have shown us that the Government were getting up a head of steam for radical reform but which, in fact, has been celebrated more for what it does not contain than for what it contains.
Listening to what I suppose the Conservatives would describe as an attack, I wondered when we would receive an apology for the fact that they signed the Single European Act and the Maastricht treaty. They now denounce those actions, consider them to have been a fatal mistake, but have not yet admitted that they should not


have done what they did. The truth is that this is a party that has made up its mind that it likes being in opposition and intends to stay there. It does not wish to deal with the question of how a country is to work in an expanding European Union in which it must advance its national interests in concert with other countries that are trying to do the same.
I commend the Chief Secretary's clear statement towards the end of his speech about tax and revenue co-ordination. As they stand, the treaties are unequivocal. It is no good quoting officials who may wish that they were different; they have been negotiated, and they are clear.
Many of us—many Liberal Democrats, certainly—who support the principle of British participation in the single currency, and support the idea of a single currency, believe that the corollary of a single bank setting a single interest rate is fiscal flexibility on the part of individual Governments, enabling such a system to be accommodated within their different national entities. It makes no difference what one member state says; we must all agree. The measure cannot be rammed through against our will. We retain that democratic right, and it is worth our saying as much to those who believe that we have given it up.

Mr. William Cash: Will the hon. Gentleman give way?

Mr. Bruce: Not at this stage.

Mr. Cash: It is at this stage that I wish to intervene.

Mr. Bruce: That is a good reason for me not to give way.
Let me deal with some of the measures that do feature in the Queen's Speech. My hon. Friend the Member for Northavon (Mr. Webb) will lead our party's scrutiny of the working families tax credit. He is generally accepted to be an expert on the subject, and I am sure that, if he catches your eye, Mr. Deputy Speaker, he will give us the benefit of further insight.
My hon. Friend the Member for Twickenham (Dr. Cable) will be following the progress of the Bill regulating the financial services. I shall not say much about the Bill, but, in principle, we have no difficulty in supporting its objective. The devil will, of course, be in the detail. I was interested by the Chief Secretary's suggestion that a joint scrutinising Committee should be set up before the presentation of the Bill: the idea has merit. The right hon. Gentleman also acknowledged that, in financial regulation, it is essential to get the balance right. The argument will centre on whether over-regulation will suppress creativity in the market, or whether under-regulation will damage consumer confidence—especially in a climate in which the Government have, in my party's view, ducked the expansion of the private sector into public-provision pensions. They will need to address that sooner rather than later.

Mr. Cash: Will the hon. Gentleman give way now?

Mr. Bruce: I will not give way to the hon. Gentleman, who has only just come into the Chamber with the sole purpose of intervening.
At the risk of provoking the hon. Gentleman yet again, I want to talk about European issues and policies. I must tell the hon. Gentleman that he does not have a monopoly of interest in that subject, or the right to assume that he can automatically intervene every time it is mentioned, no matter how Pavlovian his reactions may be. I also want to talk about the new public service agreements.
The Liberal Democrats were disappointed, but not surprised, by the fact that the Gracious Speech contained no measures designed to pave the way towards joining a successful single currency. We have argued—we commend the proposal to the Government—for the publication of a six-monthly joint Treasury and Bank of England report on the extent to which our economy is converging with those of our continental partners. Such a report would not only inform but co-ordinate monetary and fiscal policy in the run-up to euro membership.
As I have said on a number of occasions, the Government seem to be saying, "In principle, we see no objection to joining. The private spin is that we are very much in favour of joining, but we are waiting for things to settle down." I do not think that an undertaking of this importance can be secured on a wing and a prayer; it requires a strategy, and practical action. I would go further, and say that the Prime Minister and his senior Cabinet colleagues will have to come out of the closet.
I understand that, in his previous cloak-and-dagger incarnation, the Secretary of State for Trade and Industry believed that the Government—who were all privately committed to British membership of a single currency at the earliest practical opportunity—should wait for public opinion, and the opinion polls, to come round to it. But if they wait, it simply will not happen. When the Murdoch press and its allies are in full cry—when they are organising the argument on one side, and there is nothing but silence from Downing street and the Treasury—are we surprised that the opinion polls are saying what they are saying? We need leadership, we need a timetable and we need a strategy. We cannot simply drift.
If we are to trade within the single currency—regardless of whether we join sooner rather than later—we must address the fact that, within the single market, we suffer from a pound and interest rates that are too high for our current trading competitiveness. Those who look at the trade-weighted value of the pound may think that it is only a little above the May 1997 level, but if they look at the real, effective sterling exchange rate, using the OECD index, they will see that it is some 8 per cent. higher than the May 1997 level, and 26 per cent. above that of May 1996. That takes account of differential rates of inflation. In other words, sterling is clearly over-valued, and, as a consequence, life will remain tough for exporters. That is not just my opinion. For example, a report by economists Goldman Sachs in this week's economic update—that company is not that far away from the Government, so I do not think that its views are greeted with total indifference at the Treasury—says that DM2.50 would be about the fair value; that is 30 pfennigs lower than the current rate. Okay, interest rates have come down a bit, but 6.75 per cent. is slightly more than double the 3.3 per cent. average in the euro zone; I hope that we agree about that. Even if hon. Members are totally committed to having nothing to do with British membership of the euro zone, that differential is a problem that we should at least try to address.
Even pre-Christmas, the retail side of the British economy looks a bit soft. Against that background, the Bank of England may cut interest rates by a further 0.25 per cent. next Thursday, but that still leaves a yawning gap. I am not tempting the Chief Secretary to intervene—indeed, I do not think that I will succeed—but even if there is a cut, I do not think that the Government can pop out of the woodwork on Friday and say, "There you go: the gap is narrowing." It is still huge.

Mr. Bercow: Can the hon. Gentleman offer a single historical example of a single currency zone that has been formed without either formal tax harmonisation, or increased transfer payments from the centre?

Mr. Bruce: Harmonisation is not necessary. For example, it does not occur in the United Kingdom and Ireland; it does not even occur in the United States. I accept that there is an argument about transfer payments, but such payments were not made on the creation of the UK when there was a huge movement of people. However, the fact that something has not happened is not a reason for not attempting it, but then the hon. Gentleman is a Conservative and I am a Liberal: I believe in radical change and he, presumably, does not. Of course I accept that there are difficulties, but, when 11 countries have embarked on an enterprise of this type, we should not assume that it cannot happen because it has not happened before.
If the Government's true position is that they are in favour of joining a single currency, they should make that clear because that would, in itself, help to bring about a degree of convergence and enable people to start to make the preparations that the Government are urging on them, without offering them any clear timetable. It is not realistic to expect businesses to spend millions of pounds—indeed, tens of millions—preparing for something that may not happen, let alone if they have no idea when it will happen.

Mr. Woolas: rose—

Sir Teddy Taylor: Will the hon. Gentleman give way?

Mr. Bruce: No. I want to proceed because of the pressure on time.
In the meantime, because of current problems, and as part of our preparations for eventual membership of the single currency, there is a requirement on the Government to do something to take the pressure off the hard-pressed manufacturing, farming and tourism sectors. Manufacturing faces an almost certain recession in 1999; whatever the Treasury forecast may say, that seems highly likely.
There is a discrepancy between what the Government have been saying publicly about their European economic policy and what apparently is being said on the quiet in Brussels—and not in the House. I am talking about "The New European Way"—about which I intervened in the Chief Secretary's speech—which has been published in the name of the party that calls itself the European Socialists—which I suspect sends a shudder through new Labour—but which most of us know was written by Ed Balls, although its authorship is now disowned. It was certainly put into the pot with the Chancellor's blessing and support.
Because it is a Euro-report, it contains quite a lot of mumbo-jumbo which is open to interpretation, according to people's opinions, but it addresses two crucial issues: monetary openness and fiscal flexibility, and tax harmonisation. The Tory amendment is on the mark at least in one respect: we do require a clear Government statement on those issues to the House. I accept that the Chief Secretary has gone some way towards giving us that statement, which was genuinely helpful and timely, and I commend him for his clarity. On the whole, it was also about right. It is high time that the debate centred on what the law is, rather than what certain motivated journalists wish it were, or wish people to believe it to be.
The Chancellor appears to want a more open and accountable European central bank than that set out in the Maastricht treaty. I agree that that is sensible. That is one of the reasons why the sooner we get in and can bring some influence to bear, the better. That does not mean interfering in the decisions of the European central bank, or carrying out the megaphone monetary policy adopted by the newly elected politicians in Germany—I suspect that they will learn a thing or two in a fairly short time—but it is about arguing that the British model of central bank independence, which I know does not command total support in the House, has something to commend itself to the continental model. It would provide for operational independence, but would make the European central bank much more open and accountable to public scrutiny—not open enough for the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), but I am sure that she would agree that such transparency would be better than that which it offers.
I do not expect the Tories to have a view on that. Indeed, I do not know when they will review their policy given that the shadow Secretary of State for Trade and Industry has said that 2002 will be early enough for the Tories to make up their mind whether the Bank of England should stay independent. As has already been quoted, however, the shadow Chancellor has certainly said that either we should have complete political control, or the Bank should be completely independent. He has not made up his mind which, but he is wrong.
The Government have rightly been criticised for the shortness of the contracts that were given to the members of the Monetary Policy Committee. Even if it does not mean that they are less independent, it creates the wrong impression—that they can be reappointed by the same Government who appointed them in the first place. We would like that to be changed, but we need a proper balance between operational independence and public accountability.
If we could export that model to the continent, rather than take on its arrogant and somewhat bureaucratic mode, we might be doing a service to other member states, and the peoples of those member states, who feel that they have to have some input, without interfering in the way in which the European central bank works. That would increase public confidence in the belief that it would be a force for stability and low inflation, and would not compromise on the anti-inflationary drive. Some people imply that it would do the latter—usually those who do not support the idea of operational independence in the first place.
I get the slight feeling—a vibration—that the Government might like a little more fiscal flexibility, particularly with regard to borrowing for capital spending. At the moment, that is not allowed for in the stability pact, but there have been enough noises, both formally and informally, from British Government sources to suggest that the Government believe that it perhaps should be.
Alastair Campbell is on record—he is not officially a Government spokesman, but, by God, when he speaks, most people listen; I think Labour Members listen even more closely—as saying that the Government do not want any watering down of the fiscal rules. The question is: why do not the Government want any modification? Surely we should look at our model and suggest that that commends itself to the continent, and that our rule is more reasonable and more generous on the capital spending front. We should surely fight for maximum fiscal subsidiarity in Europe.
I am sometimes puzzled by the Chancellor, who makes some robust statements, echoed by the Chief Secretary today, about the need for fiscal independence, but who seems unwilling to use the very fiscal independence that he has to help to manage the economy in a way that would bring about convergence. At least he agrees that such independence should be retained.
Lloyds bank does not have any agreement regulating the borrowing of National Westminster bank; nor should it, even though one's intervention in the market affects the other. They just adjust their behaviour accordingly.
I am not suggesting that sanctions should not be imposed on countries with unsustainable debts. However, within a disciplined framework, there should be maximum flexibility, particularly for countries such as Britain that have a very low debt-to-GDP ratio. For countries whose ratio is either above or close to the limit, achieving such flexibility should be an incentive to reduce it and, in goods times, to try to get it below that limit. They could therefore achieve flexibility in a revised stability pact. I should have thought that that would commend itself to both sides of the House, as it is about allowing a more flexible approach to economic management.
It is essential that we have tax harmonisation. It is also true that our tax rates must be competitive internationally and not only in Europe. In many ways, tax competition is helpful and more appropriate than harmonisation. The Government have made it clear that they will retain the veto and use it; their intention is as clear and unequivocal as anyone could wish.
I certainly do not believe that we should be signing up to Euro-uniformity simply for the sake of it. It will have to have merit and benefits, and offer added value and added advantage. However, let us not go to the extreme that we are not prepared even to discuss it or to explore the possibility that there are tax anomalies that disadvantage us in the single market or in third markets. It really is unhelpful if, every time a sensible discussion of the matter is proposed, Euro-sceptics foam at the mouth and say, "There you go again—you're about to sell your country short." Surely we can examine whether there are ways in which we can co-operate while retaining our right not to accept imposed tax policies. If so, we must be prepared to say no.
The Government will introduce public service agreements, on which there will be an announcement sometime this month. My colleagues and I have a particular interest in such agreements, as we made a study of how one system operated in New Zealand, which demonstrated commendable aspects of performance delivery. However, I should tell Ministers that, when I spoke to politicians and civil servants in New Zealand, it was made absolutely clear to me that the system could not work without freedom of information legislation. They said that that was central to ensuring that the system operated in the open and that the public knew the basis of the agreements and bargains which had been struck.
Liberal Democrat Members should therefore like to know whether the new agreements will contain clear, concrete and measurable targets for improving public services. If so, has there been consultation on the targets? If so, what type of consultation was it? If not, will there be consultation? I believe that the matter should be open to wide consultation.
The fundamental question is why the agreements are with the Treasury. If the agreements are to be about public administration, should they not be with Parliament and the representatives of the people? What independent measures will monitor performance against contracts? How can we ensure that contracts between Ministers and civil servants are fair and equal rather than one-sided? They will have to be equal if civil servants are to fulfil the contracts honestly. What action will be taken to ensure that targets are met? In New Zealand, contracts contain an element of performance-related pay for chief executives. I feel that that should apply also to Ministers, so that the bargain is equal.
Those issues are real ones. The introduction of service agreements is a radical, very important step which could fundamentally change the way in which services are delivered in the United Kingdom. However, if they are to work, they will require openness, clear targeting, clear objectives and independent monitoring, so that everyone may know what was undertaken and of any changes.
Some of the Government's actions—some of which I have previously used as examples—would have been different if there had been agreements according to the necessary terms that I have outlined. The Prime Minister, for example, said that our priority is education, education, education. The reply should have been, "Fine; but specifically what will you do each year to deliver improvements in education? What contracts have been signed to deliver detailed action?" I say constructively—not negatively—that that type of public service agreement means something and is not mere sloganising.
Similarly, when waiting lists shot up, the Health Secretary announced on the "Today" programme that he was responsible for the rise because he had decided that he wanted to deal with accident and emergency priorities before reducing waiting lists. Regardless of whether that was the right decision, had he made a contract to deliver lower waiting lists, he would have had to admit publicly—and not after the event—that the contract had been changed, and there would have been a debate about it. Contracts seem to offer a genuine means of involving Parliament and the public in the delivery of policy. Such changes may be dangerous and uncomfortable for Government, but, if Ministers are serious about modernisation and openness in government, such radical


thinking is required. I applaud the Government's initiative on agreements, but am unsure whether it will be as radical and farsighted as the Government claim.
My right hon. Friend the Member for Yeovil (Mr. Ashdown) said in his opening speech in the debate on the Loyal Address that we would never have achieved the welfare state and the national health service if Lloyd George and Nye Bevan had been as timid in the second Sessions of their radical reforming Parliaments as the current Government have been. That observation may come back to haunt the Government. Nevertheless, the contents of the Queen's Speech are only part of the programme, and the Government may introduce other measures. I hope that the radical will to make progress has not disappeared entirely from the Government.
On a constituency and important personal note, I should like to add that, during this Session of Parliament, there will be elections to a Parliament for Scotland and an Assembly for Wales, which will have a fundamental impact on how the House is run and on how the United Kingdom develops. I say that as someone who believes that the United Kingdom has enormous strengths, from which we all draw and which greatly benefit us all. However, that benefit requires a recognition of the distinctive character of the component parts of the United Kingdom. There will have to be an English dimension to how things are done.

Mr. Deputy Speaker: Order. So that the House is aware of how we will conduct this debate, I should tell the hon. Gentleman that it is strictly on the economy, not on constitutional matters that could have been debated earlier.

Mr. Bruce: Thank you, Mr. Deputy Speaker; I thought that the debate was on the Queen's Speech, but entirely accept that stricture from the Chair.
The economic relationships between the House and the new Parliament and Assembly will be crucial. I simply urge a recognition that, initially, there will be tensions that will have to be resolved.

Mr. Bercow: Will the hon. Gentleman be standing for the Scottish Parliament?

Mr. Bruce: That is irrelevant.
Perhaps you will help me on this, Mr. Deputy Speaker. There was a suggestion that, by next June, Scottish Members will have nothing to do in the House, which is why the Queen's Speech proposed no Scottish legislation. The fact is that 90 per cent. of the Bills in the Queen's Speech will apply to Scotland, and Scottish Members, who have been elected to the House, have a real interest in their progress. The House and the public should understand that point.
The Government have introduced reforms, not all of which they themselves fully understand. It will require some understanding, flexibility and tolerance if those reforms are to succeed. In that spirit of understanding and tolerance, I believe that what has been set in train will create a much stronger United Kingdom.
The House is debating Europe and Westminster, and I have just discussed Scotland. I believe that we shall require all those levels of government, and that we shall have to take appropriate decisions at the appropriate level.

As a Scottish Member, I am delighted that there will be a Scottish Parliament. I am equally delighted that Scots will continue to play a full participating part in the United Kingdom Parliament. I also look forward to the day when the United Kingdom is a fully paid-up member of the European Union, rather than a part-time observer on the touchlines.

Mr. Robert Sheldon: The hon. Member for Gordon (Mr. Bruce) concentrated much of his speech on the single currency. I am sure that he shares my belief that our main economic task in this Parliament is to prepare for entry into the single currency. However, preparation appears to be missing.
I have always thought that the move towards a single currency was too hurried and that a longer timetable would have been much more sensible; however, a decision has been made. We are fortunate to have my right hon. Friend the Chancellor of the Exchequer and his predecessor, two of the most able Chancellors in recent times, who have had a close identity of view on some of the most essential aspects of our future. Nevertheless, we have paid a high price for not joining the single currency at the outset. Only yesterday the merger between the Deutsche bank and the Bankers Trust resulted in the reduction of their involvement in the City of London. That was in part a consequence of our not having joined the single currency.
There has been a terrible catalogue of missed opportunities year after year and decade after decade. The Government's first economic decisions, which devolved some of their powers, should have made closer integration into Europe far more acceptable. Control over exchange rates went to the markets and control over interest rates to the Bank of England. Income tax—that great engine of Government finance—was circumscribed by Government promises before the election. All those changes should have been a precursor to our entry into economic and monetary union and the single currency. We may still be paying the price.
In the Financial Times yesterday, Sirkka Hämäläinen, one of the six executive board members of the European central bank, said:
Exactly where the eurozone's monetary system will concentrate, however, is impossible to forecast … It can concentrate on certain national central banks near large financial centres, or it could be centralised in the ECB.
That is a danger to us. I am quoting her not as authoritative, but as having some understanding of the matter.
In the 1950s, we missed taking the leadership of Europe, although it was offered to us on a plate. Then we missed taking our place as one of the three leading players and then we missed being the headquarters of the European central bank, instead of Frankfurt. Now, as my right hon. Friend the Chief Secretary to the Treasury said, we are even risking London's position as the overwhelmingly dominant financial centre of Europe. Only recently, we have lost the Bankers Trust, through a merger, and the entire German Government bond market to Frankfurt. That would never have happened had we joined European monetary union and the single currency at the outset.

Mr. St. Aubyn: Perhaps the right hon. Gentleman should clarify the issue. It was surprising that the German


bond market came to London in the first place. It came because of technological advance here; innovation and technological advance in the German market has won it back. What we are discussing is far more important. Our financial market will be restrained in Europe if we are over-burdened and over-regulated, and we are under threat of that from Europe.

Mr. Sheldon: The German bond market did go back to Frankfurt, however—that is the top and bottom of it. Had we been closer to the European central bank, that might not have happened.
The most important issue relates to decisions that will be taken early next year. The most crucial decisions of any institution are taken at its commencement. Despite the high standing of our Chancellor, those decisions will be taken by the single currency adherents. The decisions will be theirs, although they may affect us.
What should we do? I believe that, without making the final decision of setting a date, we should state our firm intention of joining the single currency. That would have an enormous effect immediately. It would reduce interest rates and exchange rates would become more realistic. It would improve inward investment. It would also strengthen the position of the Chancellor. It would not be as good as being a member of the club, but it would represent a delayed but certain application and put us in a better position to argue our case. We do not seem to understand that there is a big battle ahead. Entry on our terms is not a foregone conclusion. We seem to lose sight of the work that is needed to meet not just our requirements for entry into the single currency, but our partners' requirements from us.
One of the biggest issues is the level of the pound at entry. It has to be negotiated and the negotiations will not be easy. The longer we delay, the longer the other countries will have settled down to their new arrangements making it more difficult for us to obtain the conditions that we want. The longer we delay, the more conditions we shall be expected to fulfil and the more difficult it will be to find an easy passage into the euro. How will we get the exchange rate that we really need? In what used to be considered normal times, the recent decline in our balance of payments would have resulted in an automatic decline in the level of the pound, but capital movements and other factors have helped to offset that.
With my interest in the manufacturing industry, I would wish a rate nearer the lower end of what is being suggested. The prospects for manufacturing industry have been deteriorating. The pre-Budget report predicts an increase of 0.25 per cent. this year. Next year, it should be in the range of minus 0.25 per cent. to plus 0.25 per cent. More recent estimates are even more pessimistic. One important component is the level of the pound. Considerable time lags are involved. Profits can be squeezed in the short term and customers may remain loyal for a while, but sooner or later time runs out and manufacturers have to raise their prices to stay in business and their customers look elsewhere. The pound has been too high for too long. On entry into the single currency, we shall need to fix a more realistic rate.
We all have our views on the right level for the pound. The desirable level seems to be somewhere between DM2.30 and DM2.70. As I said, I would want a level

towards the lower end of that. Whatever is the right rate for us, how will we be in a position to negotiate the rate we want when we are seen as Johnny-come-lately—only wanting to join when the success of the union is assured? The others have taken a risk. We are waiting to see whether it is successful and only then shall we say, "Yes, it is a good club. You have done all the hard work and made it work well. Now we are going to give you the privilege of having us join you." That does not appear to be a good negotiating stance. We should not be surprised if the others resent our attitude. The danger for us is that that resentment could lead to economic disadvantages for us. In particular, it could limit the range of the value of the pound at which we may wish to enter.
We keep saying that, once we are members of the new club, we will be able to use our veto more effectively. Threatening to use the veto even before we enter is unlikely to make the rest of the EU anxious to have us in. We need to consider much more closely the costs of delay in joining the single currency and the need to take decisions that will improve our prospects on entry.
I should like to say a little about the Monetary Policy Committee. It has only one goal—controlling the level of inflation. Only after that goal has been met can it consider the other factors of economic management, such as growth and investment. It would be better if we learned the lesson of the United States Federal Reserve. Alan Greenspan considers the level of inflation in determining his monetary policy stance, but he also takes the economy into account. His remarkable success might have given us second thoughts on how the more limiting criteria that the Monetary Policy Committee has to observe might be broadened, at least up to the level of those of the United States Federal Reserve.
An amendment was tabled to the Bank of England Bill in another place that would have required the Monetary Policy Committee to take wider issues into account. Perhaps we should return to that. In the meantime, we can consider broadening the committee. My right hon. Friend the Chancellor cannot be expected to pack the committee with representatives of every interest group. However, he can get a better mix. Now that we have some experience, perhaps those wider considerations might be taken into account when a vacancy arises.
My final point is on the cost of earning a living. There was a time when everybody lived near to his place of work, be it the mill, the engineering factory or the pit. People's clothes were working clothes and everybody knew what working clothes were. They all took a jam butty, or whatever, and had no travel expenses because they walked to work.
Now, the cost of earning a living is very large and growing. In almost all walks of life, people have to spend a bit of money on their clothes. They certainly have to have something better for their meals. Most importantly, they have to travel. We do not have the London weighting allowance in the north-west—we have to pay for our transport. It is expensive and the distances covered are becoming greater. I know people from Ashton-under-Lyne who work in Bradford or Eccles. It is quite common for people in all parts of the country to travel 20 or 30 miles to work—distances that used to be the prerogative of London. That has to be paid for out of taxed income. Those costs are wholly, exclusively and


necessarily incurred, whatever the Inland Revenue may say, because people cannot earn a living otherwise. However, the costs are not deductible.
I sympathise with the difficulty that the Inland Revenue would have in trying to control such enormous expenditure. It would have to ask questions of every taxpayer. However, it is a manifest injustice that people spend so much of their after-tax income on the essential task of getting to work.
There used to be an earned income allowance. I supported such an allowance and regret its passing. In the early years of this century, the justification for it was that unearned income from dividends or interest was more secure and did not have the vagaries of employment or other forms of income, so it could be taxed more highly. That argument diminished as savings became more widespread. However, the costs of earning a living have increased greatly. I know that there is little enthusiasm for income tax changes, but when such changes become respectable again—when income tax becomes a more acceptable form of taxation than I fear it has been recently—that anomaly will have to be looked at.
As I said at the outset, the prime economic task of the Government is to prepare for entry to the single currency. I should like there to be a programme that set that out as our highest economic priority.

Sir Peter Tapsell: It is always a particular pleasure to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) in an economic debate. We have debated the economy across the Floor of the House for many years and I have a high regard for him. When he was a Treasury Minister, he had a magnificent record in trying to restore fiscal prudence to a Labour Government when fiscal matters had got out of control. He will not be surprised to hear that I did not agree with the main thrust of his speech about Europe, but I certainly agreed with his remarks about Mr. Greenspan and the fact that the United States Federal Reserve does not take a narrow view about inflation, but takes a wider view that embraces growth, employment and other social factors.
I welcome the Chief Secretary's carefully worded statement, giving the most categorical assurance to the House and the nation that the Labour Government will veto any attempt by the European Union to impose tax harmonisation on this country. I am sure that he will have the almost unanimous support of Conservative Members in honouring that pledge. However, history has proved that Ministers who give such assurances in all good faith can find it more difficult than they had supposed to fulfil their undertakings.
While the Chief Secretary was speaking, I was handed a piece of paper from the Press Association tape from Brussels, reporting events of only a few hours ago. It said:
German Finance Minister Oskar Lafontaine today called for majority voting on tax harmonisation in Europe—removing Britain's veto.
Mr. Lafontaine is quoted as saying:
The principle of unanimity must be broken.

I am sure that that sounds even more impressive in German.

Mr. Byers: Will the hon. Gentleman confirm that that was a personal statement by Mr. Lafontaine, rather than a statement on behalf of the German Government?

Sir Peter Tapsell: Yes, Mr. Lafontaine said that. However, when Finance Ministers say, "This is a personal statement and that is a Government statement," I become somewhat anxious. I hope that the Chief Secretary's statement to the House about tax harmonisation was a Government statement rather than a personal one. I am reminded of Harold Wilson's habit, when he had made some great announcement to the country on television or elsewhere, of saying, "This is not just a pledge; it is a promise." Sometimes, he would say, "This is not just a promise; it is a pledge."
I hope that Ministers here and in Europe will not become too schizophrenic and will not think that some public statements can be passed off as just a personal point of view while others count as ministerial statements. All the Finance Ministers of Europe are meeting today. It is such a crucial meeting that our Chancellor feels that it is more important to attend that meeting than the economic debate on the Queen's Speech. In all my years in the House, I cannot remember a Chancellor not being present at this debate. This is the day that the Finance Minister of Germany—the most powerful economy in Europe—has chosen to say that the principle of unanimity on harmonisation of taxation must be broken. Ministers should take that statement seriously.
The Gracious Speech says:
My Government believe the historic decision to give the Bank of England the power to set interest rates has been crucial to the meeting of its inflation target and credibility in the system.
I hope that it will not sound ungracious if I point out that inflation today is approximately the same rate that the Government inherited from their predecessors and that the credibility of the Bank of England's inflation forecasting machinery has never been lower. It has been difficult in recent months to meet, anywhere in the country, any industrialist of experience—certainly anyone who has worked in the exporting industries—who believes that the Bank of England has been getting its monetary policy right.
The Chancellor is clearly anxious about his hasty and furtive decision to give independence to the Bank of England a few days after the general election and to abandon his ministerial responsibility for monetary policy. That was not in the Labour party's manifesto and it was not agreed with the then shadow Cabinet before the general election. We are told that it was not even put to the full Cabinet for discussion before the announcement.
As I have said in the House before, that decision was one of the most important that the Government have taken; I believe that it will prove to be an albatross around their neck and the neck of the nation for many years to come. The whole project was very much the Chancellor's baby, which is why he keeps saying that it has been a huge success. As its unwisdom becomes ever more evident, we must not forget that he is the man to blame.
Lord Healey has pointed out, in his usual frank and genial way, that
an independent Central Bank is a gimmick to be used as an apologia by failed Chancellors to shuffle off their failures on to the Bank of England.
He speaks with some authority on these matters. The failure of the experiment has already become evident and the shuffling off has already begun. As soon as it became evident to everyone that the Bank of England had pushed up interest rates too far, Ministers scurried around briefing everyone, on and off the record, saying that they favoured a cut in interest rates. By then, however, the damage had been done.
For a year, the academic economists—none of whom has had much experience in industry or any form of business—have been fighting the battle on the wrong front, looking over their shoulders at past inflationary problems rather than forward to the darkening skies of what will almost certainly be the most serious world recession since the war.
Six increases in the bank rate—making our interest rates the highest in the developed world—produced a seriously over-valued pound for a prolonged period. The speculators were happy to take the enhanced income that was offered to them, but the price was paid by our export manufacturers and farmers, for whom this monetary mismanagement has been a disaster.
The Bank of England and those on the Treasury Bench cannot accuse their critics of being wise after the event. For more than a year, some of us have been warning the Chancellor that 1999 would be a year not of inflation but of recession, or worse. On each occasion I have put that point to the Chancellor in the House—when one can catch him here on one of his flying visits from Europe—he has invariably dismissed it with his usual cocky bombast. He has uttered the meaningless slogan that he had no intention of pursuing a policy of boom and bust—as though anyone had asked him to do so. Now the penny has finally dropped, even for him. Boom is no longer on the British economic agenda, even as a slogan, but bust most certainly may be.
The academic economists have now cut interest rates and will doubtless cut them again, if not on their own initiative at least every time that Mr. Greenspan gives them the lead. The damage has already been done, however. There is always a time lag before changes in monetary policy are felt throughout an economy—it may be 12 or 15 months or longer. The damage caused by the Government's mistaken monetary policy—they cannot shuffle off the ultimate responsibility, certainly not in the eyes of the electorate—will be felt for a long time. Some exporters and farmers will never recover, but will be forced out of business.
The decision to give independence to the Bank of England has been a disastrous failure so far. The Chancellor is looking more and more like Philip Snowden and less and less like Maynard Keynes. As hon. Members from both sides of the House have pointed out in the past 18 months, if one puts a central bank in sole charge of monetary policy and gives it a target for inflation but not for growth or employment, one is bound to end up with an excessively tight monetary policy and rising unemployment.
That is exactly what happened in continental Europe, which was the main reason why Chancellor Kohl lost the German election on 27 September and why President Chirac lost his conservative parliamentary majority in the French Assembly. Mr. Lafontaine, the new German Finance Minister, seems to understand that well. In recent years, the record of the previous German and French Governments, whether of the left or of the right, has been disgraceful in the crucial matter of employment.
At a conference in Berlin at the beginning of the year, I pointed that out in a private conversation with a senior Minister in the previous German Government. I asked him whether he was concerned that unemployment in Germany was approaching the level that brought Hitler to power. He replied, "The situation today is quite different. Our social benefits are now so good that many Germans, particularly in the east, are better off out of work than in work and many of them don't want to work anyhow." No doubt that reply was realistic, but it represents a lamentable way to run an economy. That approach will eventually produce a lack of international competitiveness, which will be a threat to the welfare budget as well as to employment.
That is exactly what is likely to happen when fiscal and monetary policies are separated. Governments run an even laxer fiscal policy to cope with social discontent and the independent central bank tightens monetary policy to offset the lax fiscal policy. One ends up simultaneously with a monetary policy that is too tight and a fiscal policy that is too loose. That is the almost inevitable consequence of putting responsibility for the control of those two levers of economic management in different hands. The result is bound to be higher unemployment than is necessary to maintain a reasonably stable currency.
As Aneurin Bevan was fond of saying, "You do not have to look into the crystal ball when you can read the book." Turn to almost any page of that book in recent years and the writing is clear—it is set out in capital letters. In the 1980s, the United States Administration ran a lax fiscal policy, the Fed responded by running a tight monetary policy and American unemployment soared. In Germany, in the 1990s, the German Government ran a lax fiscal policy, the Bundesbank responded with a tight monetary policy and unemployment soared. In Britain, while we were members of the exchange rate mechanism, we followed the same policy mix, with the same dismal result.
In opposition, one of the most intellectually attractive aspects of new Labour thinking was that it appeared to have grasped the message that there must be a close correlation between monetary and fiscal policy. As soon as the new Chancellor, on his fourth day in office, announced that he was abandoning his personal responsibility for the difficult and politically burdensome task of fixing interest rates—a vital decision, which he had hidden from the electorate and, apparently, from most of his colleagues throughout the election campaign—I realised that the self-proclaimed iron Chancellor was clad in tin. So it has proved. After one year of boasting about his fiscal prudence, and as the Bank of England pushed interest rates higher, the right hon. Gentleman suddenly announced a popular and much looser fiscal policy and increased expenditure substantially over previous levels on assumptions about future growth that no one but he thinks are attainable. New Labour had transformed itself into the new Bourbons.
Mr.Lafontaine is a highly intelligent, outspoken man, full of interesting ideas. He is clearly destined to be a left-wing Newt Gingrich in Europe in the years to come, which will be tremendous fun. For all our sakes, we must wish him well, not least because of his declared intention to run our economy and tax system as well as his own. However much he may favour his general approach to Europe, our Chancellor is already jealous of Mr. Lafontaine because he is a real intellectual as well as being a real socialist. When I first entered the House, there were many people like that around and I rather miss them, so at this stage I feel well disposed towards Mr. Lafontaine, so long as he confines his activities to a purely German context. He clearly agrees with me about central banks, and he has made it clear that the lack of democratic accountability of the European central bank is unacceptable and that it must have obligations about employment and growth as well as inflation.
I seem to remember some of us—including, dare I say, my honoured Whip, my hon. Friend the Member for Beverley and Holderness (Mr. Cran), who is sitting on the Opposition Front Bench—pointing that out during debates on the Maastricht treaty and being much scorned by those on the Labour Front Bench for doing so. Of course, Mr. Lafontaine's suggestions for clipping the wings of central banks have produced howls of protest from bank governors everywhere. I cannot recall an occasion on which there has been such unanimity between governors. When they attend International Monetary Fund meetings in Washington every September, they are usually at each other's throats.
Mr. Lafontaine is also right to put the reduction in unemployment in Germany and Europe as his top priority. The political class in the European Community has shamefully betrayed its people on that issue for too long. At last, we seem to have a European Finance Minister who is determined to reverse the process, and all power to his elbow. Unfortunately, and this is where Britain must be careful, he seems so far to be less preoccupied with reducing supply-side rigidities in Germany and Europe than with emphasising the social chapter aspects of economic policy as his method of reducing unemployment. That would be a serious error if it were continued—an error into which the British Government are already falling. Like Britain, Europe needs—particularly if the world is heading for a deep recession, as I believe it is—flexible labour markets, enhanced skills and the encouragement of entrepreneurship to maintain competitiveness.
Attractive though they may superficially appear, shorter working hours, minimum wages, longer statutory holidays and extra social provisions are ultimately a direct threat to high levels of employment, as Germany and France have been demonstrating for some time. It is bad news for Britain that Labour seems to be going down that road and throwing away the benefits of some of our opt-outs from the Maastricht treaty.
Finally, contrary to what many hon. Members may expect, if there has to be a single European currency, I hope that it will be a success. It is in everyone's interests that it should be. A Europe in economic, social and political chaos would be bad for Britain. The fact that the single currency was a success in the continental sense would not be a reason for Britain joining it—but I will not develop my reasons for that now, as it would take too long and I hope to say something on the subject on a future occasion.
The nightmare scenario for the euro will be one of Governments pursuing lax fiscal policies while the European central bank counterbalances them by a tight monetary policy. However, that seems to be the most likely prospect for 1999 in our part of the world as those all around us move towards recession and, perhaps, to slump.

Mr. Giles Radice: I am glad to follow the hon. Member for Louth and Horncastle (Sir P. Tapsell), who always speaks with great style and brio. Indeed, he made a much better speech, or certainly a much more thoughtful speech, than the shadow Chancellor.

Dr. George Turner: Not very difficult.

Mr. Radice: Being a naturally polite person, I would not put it like that, but I congratulate the hon. Member for Louth and Horncastle on his speech although I do not agree with some of his views, as he knows. However, I agree that this Queen's Speech takes place against an uncertain world economic situation after the events in the far east and Russia, although it is perhaps slightly less uncertain than it was a month ago, thanks to decisive action by the Federal Reserve. In his praise for the Federal Reserve, I agree with the hon. Gentleman.
The world economic situation creates difficult problems for all western policy makers, but it is a particular problem for the United Kingdom given the fact that we were already deliberately slowing down our economy because of the dangers of overheating when we first came to power. The trick is to continue that slowdown without tipping over into recession.
The Opposition charge is that the pre-Budget report is far too optimistic in its forecasts and has left a black hole in public finances. No serious commentator agrees with the black hole argument; forecasts are always slightly suspect because no one knows the future, although I note that the Bank of England forecast is almost the same as that of the Government. Also, the Monetary Policy Committee has cut interest rates, for which it is to be congratulated. Incidentally, a distinction must be drawn between the Bank of England and the European central bank, in that the former has an inflation target and, if there is a danger of undershooting the target, the MPC is obliged to cut rates. That provides some defence against a recession, which I do not think that the hon. Member for Louth and Horncastle acknowledged.
It would be absurd for the Government to start to cut public spending on the flimsy ground that they got their forecast wrong. No responsible Government would do that. It is precisely when the dangers of recession are evident that public spending should not be cut. On the contrary, the automatic stabilisers must be allowed to work. The Government are following a sensible policy. With luck and good judgment, we will manage to avoid a recession in this country.
I agree with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), with whose speech I concurred almost completely, that the big economic event—only a month away—is the coming of the euro. The euro is enormously important not only for the 11 members who are joining in the first wave but for


the United Kingdom, which is staying out for the time being. We may have decided not to join the euro for the moment, but there is no way in which we can keep the euro out of the UK. That is the reality. It is bound to impact, one way or another, on the value of sterling. So far, sterling may have benefited from being used as a hedge against volatility in the euro, but if—as many people, including the Governor of the Bank of England, believe—the euro proves to be a strong and stable currency, sterling may experience a bumpy ride, going down as well as up. We do not know what will happen to the pound, but it could well be volatile.
There is also the impact on business. The Government are right to stress the need for preparation. Earlier this year, the Treasury Select Committee held hearings on the preparations for economic and monetary union. My hon. Friend the Member for Bolton, West (Ms Kelly), before she was translated into a Parliamentary Private Secretary, was there. Leading British firms such as ICI, British Steel and Vauxhall told us how they would be using the euro widely and expected their suppliers to do likewise. As Dr. Sykes of ICI told us,
Euro liquidity will naturally spread throughout the economy".
That will happen whether people like or not.
Of course, there will be a major impact on the City. As I learned from the Bank of England's third euro symposium at the end of October, the City believes that it is ready for the coming of the euro. It expects to become the
international financial centre for the euro".
The euro is that important for us.
I strongly support the Government's changeover plan, which will be published in the new year and will set out for business the steps that need to be taken to prepare for entry when we decide. The Government's policy of prepare and decide is a vast improvement on the wait and see of the Tory Government, let alone the 10-year delay of the Tory Opposition. The question is whether the Government's policy goes far enough.
Business leaders have told me and others that, although they much appreciate what the Government are doing, and although some are prepared to go ahead on the basis of risk, they would much prefer, and would welcome, a clearer sign than the Government have given so far that they will decide to join the euro once economic convergence is achieved.

Ms Abbott: Does my hon. Friend think that the Government's timidity about going into economic and monetary union is based on a technical objection, or on being terrified of the Murdoch press?

Mr. Radice: I think that the five conditions are very important, but it is also clear that the Government are realistic: they have to win a referendum. They must be certain, or pretty certain, before they call it that they will win it. That is only common prudence, because it would be a disaster not only for the Government but for the country if it were lost.
At the beginning of last week, more than 100 business leaders, from firms whose turnover represents more than

a quarter of gross domestic product, signed a statement in the Financial Times. They concluded:
Britain's best economic interest is likely to involve joining soon after EMU is established, and the best policy for Britain is one based on the assumption that we will join".
Since then, a further 150 business leaders have signed the statement.
On Monday, the officers and members of the advisory committee of the European Movement—including the hon. Member for Esher and Walton (Mr. Taylor)—the all-party group that was founded by Winston Churchill, of which I have the honour to be chairman, published a letter in The Independent. Its concluding paragraph stated:
The best course for our country is to prepare now to be able to join EMU when the economics are right. The government's policy of commitment in principle to UK entry is welcome. We now need an unequivocal statement by the government of its intention to join EMU as soon as proper convergence of our economic cycles is achieved, matched by an assurance that pursuing such convergence will be a key element of domestic policy in coming years.
We are not asking for a specific date but, like my right hon. Friend the Member for Ashton-under-Lyne, we ask the Government to move from if to when.
In the concluding part of my speech, I want to comment on tax, because we have heard some extraordinary scare stories on it in the British press, and an echo of them from the shadow Chancellor this afternoon. To believe what we read in the Daily Mail, The Daily Telegraph or The Sun, we would have to believe that the British will have to put up their income tax at the behest of Brussels, that the UK is forced to put VAT on children's clothes, food and newsprint and that it is forced to adopt German rates of corporation tax. I need not bother to comment on the income tax scare, because no evidence whatsoever has been produced for that.

Mr. St. Aubyn: I am grateful to the hon. Gentleman for inviting evidence on the fact that income tax would have to go up. Is he aware of the publication "UK Economic Prospects", printed last December by Oxford Economic Forecasting, based on a well-known economic model? It said that income tax would have to rise if we entered the single currency.

Mr. Radice: That is a prediction by a forecasting body, and good luck to it. It is not a firm proposal from Brussels or anyone else.

Mr. Cash: Will the hon. Gentleman give way?

Mr. Radice: No. The hon. Gentleman has not been sitting in the body of the kirk and he came in late. On that basis, I am not prepared to give way to him.
It is worth commenting on The Sun story on VAT, which was a collector's item, because newspapers should not be allowed to get away with barefaced lies. I realised that even The Sun knew that it was treading on thin ice when its political editor, Mr. Trevor Kavanagh, was sent to make the rounds of the television studios last night. If the going gets rough, "Send Kavanagh" seems to be the newspaper's line. Its headline yesterday was "Euro tax on kids' clothes—We reveal secret VAT stitch up." It said:
The tax grab plan was signed and sealed behind closed doors at the 1996 EU summit in Dublin … and Britain must agree if we join the single currency. The scheme is spelled out in EC document (96)328. The Sun has seen a copy.


So have I.
It is hardly surprising that The Sun has seen a copy, because the so-called "secret" VAT document was a Commission White Paper published in 1996. Perhaps it was not brought to Mr. Kavanagh's attention then. Obviously no one told him that the proposals in the document were not accepted by the Council of the European Union.
What The Sun did not say is that there are no EU proposals to get rid of zero-rating of VAT. That was confirmed on Radio 4 three days ago by Mario Monti, the Commissioner in charge of taxation. If there were any such proposals, they would have to be agreed unanimously by all member states. The United Kingdom is not alone in that respect: there are six other countries with zero-rating—Belgium, Denmark, Ireland, Italy, Finland and Sweden. Therefore, it is extremely unlikely that there will be any agreement to get rid of zero-rating. Certainly, that issue has nothing to do with the single currency or with UK entry into the single currency.

Mr. Michael Jack: Will the hon. Gentleman give way?

Mr. Bercow: Will the hon. Gentleman give way?

Mr. Radice: I shall give way, for the last time, to the right hon. Member for Fylde (Mr. Jack).

Mr. Jack: Given the hon. Gentleman's anger about Mr. Kavanagh's misreporting, does he propose, as Chairman of the Select Committee on the Treasury, to invite that journalist to give evidence to his Committee and to explain that misreporting, so that we may all understand a little better how The Sun operates?

Mr. Radice: I think that The Sun has had quite enough publicity for that barefaced lie, so I certainly shall not do as the hon. Gentleman suggests.
It is absolutely true that Oskar Lafontaine, who has been so heralded by the hon. Member for Louth and Horncastle—never was a socialist so praised by a Conservative; normally one has to be dead to be praised, but apparently in this case one has to be German and a Keynesian—has said that he thinks that there should be a minimum rate of corporation tax. However, that is not yet a proposal of his own Government. I can state quite categorically that there is no question of Britain adopting German rates of corporation tax. Any proposal would have to be agreed unanimously and seven member states—not just Britain—have low corporation tax regimes, so it is hardly likely that those seven countries would agree to put up their corporation tax to German levels.
A code of conduct for business taxation was signed last December, a fact not commented on by those who criticised it—[Interruption.] Well, one person may have mentioned it, but no one else has. My hon. Friend the Financial Secretary chairs the group on the subject, which will be reporting soon. The so-called tax harmonisation scare has little to do with the single currency, but everything to do with the single market, which emerged from the Single European Act. The Conservative party introduced that legislation and the vast majority of Euro-sceptics voted for it, so let us not hear too many complaints from them when those issues are raised.
The United States model is of one country with a single currency but many tax rates, especially business tax rates. I welcome the Government's statement on taxes today. If there is tax harmonisation over the next 20, 30 or 40 years, it will happen because all countries, including the United Kingdom, want it. I predict that any harmonisation will be downwards, not upwards. That is why the comments that we have heard this evening are so misplaced. I shall vote for the Queen's Speech with especial confidence tonight, because of the Government's sensible policies on the economy and on Europe.

Sir Raymond Whitney: I am sure that the hon. Member for North Durham (Mr. Radice) will not be surprised to learn that the passages of his speech with which I had the most difficulty were those dealing with the domestic economy. He suggested that the statistics on the likely growth rate of the economy over the next few years are flimsy and should therefore be disregarded.

Mr. Radice: I did not say that.

Sir Raymond Whitney: If I have misrepresented the hon. Gentleman, I beg his pardon. I understood him to say that the statistics were flimsy.

Mr. Radice: I said that all forecasts are just that—forecasts. We cannot foretell the future.

Sir Raymond Whitney: We certainly agree that forecasts are forecasts and that we have to handle them carefully, but we also have to govern the economy and I would suggest that the way not to govern the economy is to rely on the forecasts put forward by the Chancellor of the Exchequer. The hon. Member for North Durham also referred to spending and I understood him to say that he wants even more spending—again, I hope that I do not misrepresent him—although he is happy with the Chancellor's spending proposals. It seems to me that the spirit of Keynesianism is alive and well on the Labour Benches, although my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) might have something to say about that.
I am sorry that the Chancellor of the Exchequer is unable to be here and I endorse the point made by my hon. Friend the Member for Louth and Horncastle that the right hon. Gentleman's absence is quite extraordinary. In my experience, which is rather shorter than my hon. Friend's, it is a unique omission that we do not have the benefit of the Chancellor's presence. Because the economy is at such a delicate and important juncture, it is crucial that the Chancellor should come to the nation and, indeed, the House, tell us what is going wrong, and give his explanation for it.
Preparing for the debate, I did a little research into the years running up to the election in May last year, and what a different song the gentleman who is now the Chancellor of the Exchequer sang then. In one famous—even notorious—speech, we were told about new ideas and the "new economic approach" to be vouchsafed to us.
He spoke about
the growth of post-neo-classical endogenous growth theory and the symbiotic relationships between growth and investment in people and infrastructure".


We were promised
a new understanding of how labour markets really work",
and he referred to
a new agenda for the future".
That future has now arrived and it is a fairly worrying state of affairs. The Conservatives' legacy has been squandered. I know how sensitive Labour Members are to reminders of that economic legacy, but it is important that they should be reminded regularly of it. They inherited the longest period of low inflation for 50 years and faster growth and lower unemployment than any other economy in western Europe, but the forecast for next year is that we shall be at the bottom of the growth cycle.
The Government's forgetfulness of the realities of 1 to 2 May 1997 was echoed today by the Chief Secretary, as it was in the Gracious Speech, when we heard that the Government had
reduced … borrowing by £20 billion in its first year".
What do they think happened on 2 May 1997? Do they think that a bonanza occurred, that a tree covered with lollipops and bananas was suddenly produced and down fell borrowing? That £20 billion reduction reflects the success of the economy and the legacy from the previous Government that the present Government constantly deride. That is the reason why Treasury receipts are riding so high and how that £20 billion reduction in Government borrowing, about which we have heard time and again, was achieved. I hope that all Ministers will be prepared to recognise that reality in future.
The growth forecasts are a serious embarrassment, even to the Chancellor of the Exchequer, who as we all know does not embarrass easily. Nevertheless, he still insists that growth, which will clearly be less than 1 per cent. next year, will somehow and miraculously have risen to—I must get it right, as I do not want to do the right hon. Gentleman an injustice—2.25 per cent. in 2000. As one leading international bank said, that forecast is "hopelessly optimistic". Not even the Prime Minister believes that forecast—as he demonstrated in his speech at the Lord Mayor's banquet and, it is reported, in his speech to the parliamentary Labour party.
It becomes increasingly clear that the Government's promises—about which we hear daily—about the growth in public sector spending over the Parliament cannot be met. The Government allege that growth will continue at 2.75 per cent., year on year, throughout the Parliament. As my right hon. and hon. Friends have pointed out, something has to give. It will mean either higher taxation or massive inflation, and that is the real challenge facing the Government. It is bad news for the economy, particularly when we are facing turbulence, which is an international phenomenon.
One of the tragedies of this Government's record is that £37 billion of that increased spending—almost as much as the combined increase in the health and education budgets—will be allocated to social services. Meanwhile, the pressures on industry and the manufacturing and commercial sectors—which create the wealth on which the growth will be built—will increase as a result of the Government's actions. Increased taxation and the so-called "fairness at work" legislation will create further pressures. We all want fairness at work, but we know

from bitter experience that trade union powers can be easily misused. Ensuring the rights of one worker may mean putting another out of a job. Industry is facing that and other existing pressures.
The pressures on individuals have been well documented. Most notable is the damage that the Chancellor of the Exchequer has done to pensions. I believe that the penny has yet to drop with the British public. When it does, it will have a serious political impact—as it should. It is particularly ironic that that attack on pensions and thrift has occurred at a time when Ministers are stressing the importance of personal private pensions. The lacuna in the Gracious Speech is what the Government plan to do about personal pensions. There was very little information about that in the Gracious Speech, and none at all in Ministers' speeches during the series of debates about it.
I take no pleasure in offering this gloomy perspective of the state of the economy, but it is undoubtedly true. Even more alarming is the bigoted complacency of the Government—most notably, of the Chancellor of the Exchequer. Receiverships and bankruptcies are increasing and the recession is in prospect. Barclays bank's latest briefing states:
Forward-looking survey data are pointing to a deep recession".
During the Queen's Speech debates, the Government have offered no solutions and demonstrated the emptiness and vacuity of new Labour and the third way, about which we know nothing. The theories that the Chancellor of the Exchequer offered before the election—his endogenous theories to which I referred—have been shown to be empty and naive offerings. The Chancellor must come to the House and acknowledge and accept the reality facing us in the coming year.

Mr. Denzil Davies: I expected the hon. Member for Wycombe (Sir R. Whitney) to speak about the euro, and hon. Members probably expect me to refer to that subject. However, like the hon. Gentleman, I will not. I have been mildly surprised by, and taken some pleasure in, the four speeches—including that of the Chief Secretary and those from the Labour and Liberal Benches—about the euro in this debate. The European movement is clearly in a bit of a panic.
It has been a bad week for euro enthusiasts. I know that because they have come to this place and co-ordinated or harmonised—I hate to say "orchestrated", as I am sure that that is too strong a word—their views. That is what we have heard today. I do not need to say anything about the euro because panic has clearly set in. I await with interest further debates about the veto, which will no doubt occur after the Chief Secretary has been liberal with Britain's use of it. I shall wait and see what happens.
I intend to speak about the Gracious Speech and the Government's reiteration of their commitment to an economic orthodoxy that prevailed for much of the 1980s and throughout the whole of the 1990s. That orthodoxy is now apparently summed up in one word. The word is stability and stability is the word. As I understand it, "stability" encapsulates three separate economic strands: price stability, balanced budgets and the oligarchy of the central bankers. Those three create a kind of economic trinity. So the word becomes three and the three become the word.
In his recent speech to the City, my right hon. Friend the Prime Minister is reported to have said—I only read the headlines these days—that stability is "sexy". As a Welsh Calvinist, I am not quite sure what he meant. However, I cannot help thinking that sex sometimes unleashes powerful forces that can make a mess of stability. So I am not sure whether the two always go together. To extend that analogy to the economy, there are powerful forces at work in the global economy and they are the antithesis of the powerful forces that begat the present economic orthodoxy.
The powerful forces that begat the economic trinity were the forces of inflation. However, the powerful forces that we see at work in the economy now are the forces of deflation. Therefore, the danger as I see it—nobody can foretell the future—is that stability and the present orthodoxy not only are unable to provide any bulwark against global deflation, but will give a fresh impetus to global deflation, driving prices even lower.
It is difficult to predict the future and to analyse the present. However, most people would agree that prices—not their general level, but the rate of inflation—are falling in most western countries. Farmers are getting less money for their produce. Hon. Members will be interested to learn that a newspaper states today that the price of hogs on the Chicago merchandise mart is at its lowest level in 27 years. The pig cycle is really loose in the land. I do not know about the economic cycle, about which Treasury Ministers talk. I do not know whether that lasts for seven years, 14 years or what. Clearly the pig or hog cycle is still with us.
The price of crude oil is now $10.30 a barrel, which is its lowest price for a long time. The prices of manufactured goods are falling in most western countries. In September, in euroland—the area encompassing the 11 countries that will join the single currency on 1 January—the retail price index or its equivalent was 1 per cent., so prices were rising generally by 1 per cent. In Germany, price inflation is close to zero, and in France, it is not much higher.
There is no need for me to go into detail about why there has been a fall in prices. Most hon. Members understand that global economic forces, the freedom of trade and capital and a lack of barriers have brought us back to a pre-1914 world where trade and capital move freely. The technological changes of the past 20 or 30 years have brought about a reduction in costs and greater efficiency and made it easier for other countries to compete with western nations. Enormous global competitive pressure, quite apart from macro-economic policy, is pushing prices down. To maintain their profit margins, larger companies increase their capacity. They produce more goods at the lower prices. We have an industrial hog cycle, as prices are driven down even further.
We tend to forget that the first country that suffered from all that—Japan—is the second most powerful in the world. That was some time ago. Whatever we think of price stability, Japan has plenty of it. I do not know whether the Japanese are enjoying it, but they do not need it. With the fall in prices in Japan came a fall in interest rates. I do not know whether interest rates automatically follow prices or whether the Japanese central bank reduces interest rates as a result of a fall in prices, but the two are connected. The bank rate of interest, or its equivalent, in Japan is now about 0.5 per cent.

Low interest rates did not stop the fall in prices because there is now general deflation in Japan as price rises fall below zero.
The fall in interest rates had two consequences. First, it reduced banks' profits. Banks are certainly not popular on Government Benches and perhaps they are not popular in the country as a whole, but even banks have to make profits. If interest rates fall to 0.5 per cent., there is not much room for banks to make profits. No doubt, banks can charge more for cashing cheques or other services, but, in the main, bankers make their money by borrowing at one rate and lending at another. An interest rate of 0.5 per cent. did not give Japanese banks much of an opportunity to make profits, and that had an effect on the Japanese economy.
Secondly, and more importantly, low interest rates led to asset inflation. Retail prices may have fallen but being able to borrow at such low interest rates meant that the Japanese were able to purchase shares. More importantly in Japan, they were able to purchase more land and property. That asset boom eventually went bust, and the Japanese economy is still in a terrible state.
I shall deal now with the largest and most important economy in the world—that of the United States. We have heard in this debate and read in the newspapers what a wizard Dr. Alan Greenspan is. I am sure that he is, but let us, on these Government Benches, be radical for a change and dare to criticise him. I heard a sharp intake of breath from one of my hon. Friends, but I shall chance it.
Dr. Alan Greenspan, the chairman of the Federal Reserve, is not a happy bunny. I do not know whether one should call chairmen of central banks bunnies, but he is certainly not happy. For some time, I have detected panic in his pronouncements. Before the Russian crisis, Wall street was soaring to dizzy heights. Dr. Greenspan could do nothing. He went before Congress; he wrung his hands. Sometimes he sounded more like an amateur psychologist than the governor of a central bank when he deplored the irrational exuberance of Wall street. I do not know whether exuberance can ever be rational. He was worried, but the Russians gave him an escape route, at least for a short time. He did not have to put up interest rates to stop asset inflation on Wall street because the Russian crisis meant that there was deflation anyway.
Dr. Greenspan panicked again. He tried to save a ropy secondary bank, which is now called a hedge fund, and reduced interest rates three times in two weeks. Things were all right for a while, but share prices in the United States are rising again. They did not go up today or yesterday, but they are almost back to the pre-Russian crisis levels. Why? Because the costs of borrowing have been reduced and people can again borrow to buy shares.
Dr. Greenspan is worried about his constituency. He may be a central banker, but he has a constituency—Wall street. American consumers are not saving money and are using asset inflation on Wall street to buy goods. They are also almost totally dependent on share prices in Wall street for their retirement pensions. Dr. Greenspan is therefore locked into his constituency of Wall street. He is desperate and he is afraid to put up interest rates in case he brings down share prices. That affects American consumption, which affects most of the world.
Dr. Greenspan is not a happy bunny, but one central banker—Mr. Duisenberg—is a very happy bunny. I hope that I have pronounced his name correctly.

Mr. Radice: It is pronounced Doysenberg.

Mr. Davies: My colleague from the European Movement tells me that it is Doysenberg.
Mr. Duisenberg is a happy bunny. He is the happiest central banker in the world. He has a job that will last eight years; nobody can sack him. He is accountable to no person, only to a treaty, which must be nice because there is nothing behind the treaty apart from the European Court of Justice. He does not have to worry about a single Government or a powerful stock market, as does poor Dr. Greenspan. There is no Wall street to worry about when Mr. Duisenberg makes decisions. All he has to do is ensure price stability, and he is getting there. Inflation is down to 1 per cent. One more heave and Mr. Duisenberg will have achieved zero price inflation in western Europe. He is indeed a happy bunny.
There may be 16 million or 17 million unemployed people in western Europe. I do not know how many there are in euroland, but the figure is probably about 15 million. Mr. Duisenberg does not have to worry about that. He is accountable to the treaty, which includes only a few bland words about high employment.
What about the Bank of England? I do not know whether steady Eddie is a happy bunny. He is probably fairly happy because he has not done too badly. He has hit the 2.5 per cent. inflation target three times. As the hon. Member for Louth and Horncastle (Sir P. Tapsell) mentioned, there used to be leads and lags. I do not know what has happened to them these days. I wonder whether the hitting of the target three times is due to the brilliance of the Monetary Policy Committee or to a fluke. Perhaps we will never know.
As we have been reminded, the target is 2.5 per cent. My hon. Friend the Member for North Durham (Mr. Radice), Chairman of the Treasury Committee, nods in agreement. If inflation falls below 2.5 per cent., we can push it up again. We need some inflation—not for us zero price stability. In the British system, inflation must be 2.5 per cent.—not more, not less. Apparently, interest rates will be reduced in order to bring inflation back up. If it goes down to 2.4 per cent., we cut interest rates by a quarter of 1 per cent., and up goes inflation again to 2.5 per cent.
I am amazed that those who believe in the ideology of the free market and who condemn Government intervention also believe, somehow, in the ability of centralised banks to control an economy such as ours merely by pushing up or bringing down interest rates. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) probably remembers that, in the 1970s, we were considerably criticised for fine tuning the economy.

Mr. Richard Shepherd: I suffer great confusion about all those measurements. Under the standardised European measure of inflation, as used for the Maastricht criteria, inflation in this country is only 1.5 per cent. I appreciate that that is higher than the average in euroland, which is—I think—1.1 per cent. How does

that affect the burden of the right hon. Gentleman's speech, given that he is considering an inflation rate of 2.5 per cent., which is set by the Bank of England? Does that not magnify the effect of his point?

Mr. Davies: In this part of my speech, I am being a little Englander. I am looking just at the retail prices index and the Bank of England. Obviously, different figures have different consequences.
I was trying to make the point that there is remarkable control of the economy—this fine tuning. I gather from The Times this morning that we should call such control not fine tuning but monetary activism—fine tuning bad, monetary activism good. These fashions come and go, and now monetary activism is fashionable. A member of the Soviet Union would be delighted to hear that the Governor of the Bank of England is able, in this western capitalist economy, to control the economy in such a way merely by reducing or increasing interest rates by a quarter of 1 per cent. The danger is to believe that we can stop the fall in prices merely by reducing interest rates. It might not work; inflation might fall to 1.2 or 1 per cent. The problem is that interest rates would have to follow, and then banks would be affected.
I cannot foretell the future, but I believe that a transition may have to be engineered from the present orthodoxy, which is based on inflationary forces, to a new one, which takes account of deflationary forces. Whether western Governments, Finance Ministers and central bank governors have any longer the will to engineer such a transition—indeed, whether Governments have the leverage and power to do so—I do not know. But, if we cannot engineer such a transition, the industrial economies of the west will be greatly endangered. To paraphrase poor old Tacitus, who has been paraphrased so often, if we do not engineer a transition from one orthodoxy to the other, there is a very great danger that we will create a desert but continue to preach and advocate stability.

Mr. Michael Jack: It is a pleasure to follow the right hon. Member for Llanelli (Mr. Davies), who made a thoughtful and witty speech in which he may have sowed the odd seed of destabilisation in his Front-Bench team. I studied economics by reading Samuelson—one of the text books of the day—and recall that he talked much of the hog cycle. A useful addition to the next edition would be to incorporate the right hon. Gentleman's concept of sexy stability.
It is right and proper that the Opposition probe, question and, indeed, criticise Government economic policy in this debate on the Loyal Address. The Chief Secretary's speech mirrored the absolute complacency of the Gracious Speech's treatment of the economy. One would not think that there were a great deal to trouble the economic waters of the world. All we heard were some words straight from a BBC weather forecast: that the Government are
making the United Kingdom well placed not just to weather the international financial storms but to emerge stronger from them.
That is no-problem-at-all language.
The Government's central domestic economic objectives in the Queen's Speech, which were reflected in the Chief Secretary's entirely complacent speech, are:
high and stable levels of economic growth and employment".


That is never mind the fact that, potentially, we are heading for zero growth, rising unemployment, economic uncertainty and a mis-reading of what is happening in the world economy.
I spoke recently to bankers and retailers who have been to the far east, who say that we have mis-read the depth of economic activity in that part of the world, that it will visit itself on us in no uncertain terms and that, as right hon. and hon. Members have said, the Government's and the Chancellor's assumptions of growth are way out. I therefore regard the words in the Queen's Speech as a complacent approach to the economy.
Why is it important that the Government are more accurate in their forecasting and more realistic in what they say about the economy? I attended the agricultural show at Smithfield market earlier today, where I talked to an agricultural machinery manufacturer who has seen a 40 per cent. drop in sales as a result of the Government's economic policies. [Interruption.] No Labour Members were where it was at—where British manufacturing was trying to sell its products. The manufacturer pointed out that, when people in the agriculture business heard that things would become bad, even those who were planning to make an investment decided not to do so.
Such forecasts engender strong precautionary motives on investment. The Government do not seem to understand that numbers in economic forecasting are important, but that just as important is the psychological frame of mind of industrialists. If the Government are over-ambitious with their target for growth, and it is missed, as all independent forecasters predict, the message will go out that the Government have got it wrong, and seeds of doubt will be sown once more in the minds of potential investors, as they wonder exactly which way the economy is going.
It is important to be honest and straightforward with the economy. Having been in the Treasury, I know what goes on. Officials present a gloomy or difficult set of figures, which the Chancellor of the Exchequer says he cannot possibly sell politically in the wide world. Under the new regime in the Treasury, a few of his mates get together—officials are removed from the room—to work out what they will sell politically. They ask, "What numbers can we create to make all this sound terribly respectable and saleable?" They emerge with the kind of rubbish that we have heard in Government economic forecasting. That is what happens. It is an attempt to put political spin on the situation but ignore the real world.

Mr. Sheerman: The right hon. Gentleman has spent a long time in the House, and today he has witnessed a typical example of the Opposition's attempts to talk up doom and disaster, and to exaggerate the problems in our economy and in the European and world economy. The Leader of the Opposition, in what he said the other day, and the shadow Chancellor, in what he said today—not to mention many other Conservative Members—have been irresponsible.

Mr. Jack: If that is the best that the hon. Gentleman can do, obviously he has not read the average growth forecast of the group of independent advisers who advised the Treasury. They talk about 0.8 per cent. growth in 1999 and 1.6 per cent. growth in 2000. The latter figure is well below the Chancellor's forecasts of between 2.25 and

2.75 per cent. growth in 2000. Obviously, the hon. Gentleman also has not looked at table A7 in the Budget report, which points out that even the Chancellor admits that there is error to the tune of 1.5 per cent. of GDP in his own forecast. If one applies that scope for error to the figures for the current financial year, one is down to 0 per cent. growth.
I am asking only for honesty and proper language in dealing with these matters, because of the psychology of potential investors. I return to what I said earlier. In the real world of agriculture, people are influenced by the mood of what is happening, and over-optimistic statements by Ministers will do the country's future investment decisions no good.

Mr. Lindsay Hoyle: Will the right hon. Gentleman give way?

Mr. Jack: No; I want to make a little progress, if I may.
In terms of transparency of thought, I believe that an implication of the over-optimistic growth forecasts will be an under-recovery in tax revenues. I should like an answer tonight to the following question: why are Treasury Ministers stalwartly unwilling to publish, on a monthly basis, forecasts of receipts for taxes in this country? We should have that information, to enable us to monitor carefully a key element of economic activity. The Treasury publishes figures for the actual receipts, but we have no idea how the flow of taxes—something that is an important monitoring point for future tax revenue—and, therefore, Government borrowing are going. In this day and age of open government, it is time that the Financial Secretary stopped making excuses in parliamentary answers to me, and provided that information.
While we are considering the performance of the economy, I have a chance to put the Government straight on some aspects of the previous Government's record. First, the Prime Minister triumphs in the fact that, in his judgment, it was the previous Government who had interest rates at 15 per cent. I remind him and his right hon. and hon. Friends that the previous Labour Government, before 1979, had interest rates at a similar level. Secondly, I remind him that, in the 1992 to 1997 Government, interest rates were not officially imposed at 15 per cent.
Thirdly, the Prime Minister triumphs in the present 2.5 per cent. inflation rate, but at the same time his right hon. Friend the Chancellor is fond of telling us that interest rate decisions taken 18 months ago affect the inflationary position now. I remind Treasury Ministers that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) set the interest rates that got us the present inflation rate. It is a triumph not for the new Labour Government but for his expertise in blending together data from the Treasury and the Bank of England and—most important—the touch and feel of the real-world economy. The latter is lacking under the current regime.

Ms Keeble: Does the right hon. Gentleman accept that, since the general election, the rate on index-linked Government bonds has decreased from 4 per cent. to 2.5 per cent., which, in the real world, means that the


price of building a hospital has reduced by about £1 million? That is the real world of inflation and interest rates.

Mr. Jack: That bears out the point that I have been making—that the previous Government were set on reducing inflation, and that the present Government have continued in the same mould.
Finally, I reiterate the point made by my hon. Friend the Member for Wycombe (Sir R. Whitney). The reduction in borrowing for which the Government take all the credit had started under the previous Conservative Government. The fact that the new Government inherited our spending plans, combined with the strength of the economy and rising tax revenues, is the reason that borrowing has reached the present level.
The position on inflation and borrowing, which has been good news for the economy, has been achieved at a price. Although interest rates are now falling, we should always remind our citizens that they have paid a price for the Labour Government's approach on interest rate setting. Taking into account MIRAS reductions, the average mortgage of £40,000 now costs some £32 a month more than it did at the time of the general election. That payment, by those people, is a price that will haunt the Government when they go to the ballot box.
Setting interest rates is not a scientific activity; it requires real-world touch and judgment. I am disappointed that, in the Queen's Speech, there is no hint that the Government have considered reviewing section 11 of the Bank of England Act 1998. That section says that
the objectives of the Bank of England
are
to maintain price stability, and subject to that"—
as the right hon. Member for Llanelli said—
to support the economic policy of Her Majesty's Government, including its objectives for growth and employment.
The fact that the Bank's most important objective is to maintain price stability is one of the main reasons why interest rates have not been used more sensitively. Although interest rates have an important long-term effect on inflation, they also have a profound short-term effect. In the short term, the effect of interest rate decisions was to drive up sterling, decimating the prospects of manufacturing industry and sending agricultural activity well and truly into recession.
The fact that Barclays bank, in its forecasts, talks about unemployment rising by 500,000 in the next three years may be a sign of the real-world damage of the lack of sensitivity and touch. That is where my right hon. and learned Friend the former Chancellor got it right. He listened to what the real world was saying. The one thing lacking from those who currently set interest rates is a large dollop of real-world common sense.
It should be incumbent on the Government to produce a review of section 11 of the Bank of England Act 1998, to see whether it might be modified to give the Bank—if its independent stance is to be maintained—an opportunity to take into account wider issues. Another part of the 1998 Act gives the Chancellor the opportunity to intervene if situations merit such intervention. The

Bank should be able to take into account the facts that we shall miss the growth forecast; that we have the biggest trade gap ever; and that, if the growth forecast is 1 per cent. adrift, another £7 billion of borrowing will be needed.
The Queen's Speech gives us no clues as to the Government's philosophy on, and approaches to, taxation. Previous Treasury documents contain a lot of waffly nonsense about fairness in the tax system, without defining "fairness". We get the idea that it has something to do with spending more public money and redistribution, but we do not know the Government's tax philosophy.
The previous Government made things clear. They aimed at a policy of low marginal rates; they aimed to encourage work—an objective that the present Government claim to share. However, I am not sure where the Government stand on overall tax policy.
In the "Financial Statement and Budget Report" for July 1997, tax receipts were forecast to be £382 billion. In the latest Treasury publication, for the financial year 2001–02, that figure has increased to £390 billion. The present Government have introduced 17 new forms of tax increase. Their total extra tax take in the 1999–2000 tax year will be an additional £7.135 billion, and all the data clearly show that tax, as a percentage of GDP, is rising under this Labour Government.
What statistical evidence is before the House that sets out the Government's philosophy and approach towards tax? I do not know, but it is about time that the Chancellor of the Exchequer and his ministerial colleagues produced the evidence. We need to know what the Government are doing. We are not certain whether they are trying to broaden the tax base. There are signs that taxes on aggregates, pesticides and car parking—small taxation measures that will produce £200 million, £300 million or £400 million in the winnowing of extra tax—are the way in which the Government will proceed. We certainly know that they will continue with the tax assault on the motorist. This will be done to maintain the only thing that we know about Government tax policy—the maintenance of the basic and the higher rates of tax.
It is about time that the Chancellor of the Exchequer made a clear speech on his tax philosophy. Apart from more tax in cash terms and as a percentage of gross domestic product, we are seeing a growing reliance on Inland Revenue tax as a source of revenue for the economy. In 1998–99, 55.7 per cent. of revenue will come from that source. It is important that we understand where the Government are going in that respect.
More people are paying tax under the Labour Government, even against the background of a start in an increase in unemployment. The previous Government tried hard to take people out of paying tax but the Labour Government have not made clear their objectives.
On many occasions, the Government have advertised the introduction of the 10p tax. It is Labour's big idea to try to give an incentive to work through the tax system. Again, unfortunately, the Government have not come clean. They will not tell us what the lop tax will look like in reality. Let us explore some of the real-world implications. A 10p tax to replace the 20p tax would cost roughly £10 billion. I do not think that anyone on either


side of the House would suggest that the Government have £10 billion to spend on a 10p tax, so let us look at the proposal in another way.
If the Government decided that they wanted to spend on the introduction of a 10p tax the equivalent of 1p off the basic rate of tax, that would mean spending £1.8 billion. If, at the same time, they scrapped the existing 20p band, we would find that the Government could afford a 10p rate of tax on the first £1,400 of taxable income. That is a far less exciting prospect than all of the blandishments about a 10p tax.
It is interesting to recall the number of ways in which the lop tax proposal has been recycled. In November 1992, it was advertised as a measure to "maximise the rewards from work". By the time that we reached the March 1998 Budget it was advertised as follows:
When it is right for the economy, I will introduce a 10p starting rate of tax".—[Official Report, 17 March 1998; Vol. 308, c. 1104.]
That was with no other blandishments. By 23 April, we are told:
When it is economically right to do so, and so that work pays more, we will introduce the 10p starting rate of income tax.

Mr. Oliver Letwin: My right hon. Friend is making a most interesting point. Does he agree that there is another slight oddity about the 10p rate of tax in addition to the oddities that he has mentioned? It is that the Chancellor of the Exchequer has brought it about through the working families tax credit that those who would be affected by the 10p marginal rate will be paying a 69p per cent. marginal rate in any event.

Mr. Jack: My hon. Friend makes a telling point. He is illustrating another key technical feature, which again the Chancellor of the Exchequer has not talked about. There is a crucial interaction, for example, with the married couple's allowance, which will cause great problems. The result would be that those on a 10p rate would not get the benefit of it. It is about time that the Government came clean and set out clearly the framework of the proposed tax.
I appreciate that the Chancellor of the Exchequer cannot tell us exactly about the timing of any tax change, but at least he should be honest with the British people and stop conning the people into believing that everyone will benefit from a 10p rate of tax. That will not happen. The right hon. Gentleman should make it clear whether he will restrict the 10p rate, for example, to those who are on basic rate or to those who are currently on the lower rate. Let us make it clear and let us stop, once and for all, the endless recycling of the same announcement, which so typifies much of what the Government do.
Let us come clean and make it clear that the 10p tax will do nothing to improve the work incentive. The Government say that the working families tax credit will have that effect. The Government must either get rid of the 10p tax rate or introduce it. If they do introduce a 10p rate of tax, there will be the problem of 10p, 20p, 23p and 40p rates of tax. That is complexity. We have nothing in the Queen's Speech about removing complexity from the tax system. We have heard nothing about the work that is taking place to improve clarity and further the reform of tax law. Where is the reference in the Queen's Speech to a Bill that reflects the work of the tax law re-write committee? There is nothing about that

in the Queen's Speech, and it is about time that on this aspect of tax policy, and on others, the Government came clean.

Several hon. Members: rose

Mr. Deputy Speaker (Mr. Michael Lord): Order. I remind the House that Madam Speaker has put a limit of 15 minutes on Back-Bench speeches between 7 and 9 o'clock.

Mr. Tom Clarke: Two weeks ago, in his Mansion House speech, my right hon. Friend the Prime Minister spelt out his views on the state of the British economy in the face of the global meltdown. What began last year as a local and regional crisis has spread from Asia to Europe and north and south America, becoming what is now a global crisis that is affecting us all. Against that background is the intention to steer a course of stability. My right hon. Friend then said that he wished to
combat social exclusion and create a society of opportunity extended to all.
I fully endorse such a commitment and I commend the measures to achieve that in the Queen's Speech. I congratulate my right hon. Friend on his commitment to help some of the poorest. I want to apply the same logic and commitment to the wider world, more particularly, to some of the poorest countries. I fear that, unless there is significant change in the international financial framework, progress will be made much more difficult.
Over the past few months, we have heard much about the world financial system running out of control. For many this has not been a surprise—financial markets wield enormous influence in a precarious setting. Such is their influence that adjusting to the international economy—above all, to global financial markets—has become a fixed point of orientation in economic policy. Much of the activity of financial markets is speculative. It is often driven by short-term economic considerations and based, above all, on extracting gain from expansion and the velocity of financial turnover in currency, shares, options, futures and the rest. By watching capital look for the highest return, Governments have raised its price and inadvertently caused investment to shrink. There has been a race to the top for the highest short-term return.
It is held that Governments cannot successfully second guess market decisions, and it is implied that they should not try. That view might be defensible if financial market operators had a monopoly of market expertise, but they do not. The consequences of letting the market take the lead without a clearly defined global strategy are very serious.
It is true that there has been huge growth in consumption, but that does not tell us the full story. There is no doubt that current policies on trade and investment have been accompanied by increasing disparities between rich and poor, both between and within countries.
The recent tragedies in Honduras and Nicaragua were natural disasters and no single person was to blame. Nevertheless, we can see how aspects of the global market played a part in the disaster. Many aid agencies say that, economically, it was an accident waiting to happen.
Structural adjustment programmes, sometimes naively enforced by external agencies to develop export industries such as forestry to enable the country to pay off debt, mean that 30 per cent. of Honduras's forest has been lost since 1960.
According to United Nations figures, more than 70 per cent. of the Nicaraguan population was already living in conditions of poverty before Hurricane Mitch—a situation aggravated by the application of structural adjustment policies which dictate, among other things, acute cuts in public spending. Tragically, from the lakeside communities of Managua to the country's rural communities, it is precisely the poorer sectors that have been most affected by the recent disaster. The damage inflicted on a developing country, still struggling to pay off the crippling foreign debt while it emerges from a war and a long economic crisis, could prove to be devastating.
The already insufficient infrastructure has been badly battered, with roads, bridges and basic services terribly damaged. The Nicaraguan President claims that Nicaraguan development has been set back at least 30 years, although even before the hurricane struck the country had fallen 20 or 30 years behind the 1977 growth levels as a result of a war and the economic problems of the 1980s.
Structural adjustment programmes are precarious because they are blanket approaches which ignore the enormous differences between debtor countries, and do not always give priority to social and political contexts. If democracy is to mean anything, it is surely right to permit countries to shape their economies and societies, rather than to abandon the process to the dictates of the market alone.
The claim is often advanced that Governments can do little to alter the twists and turns of world markets, but that is wrong. Globalisation is not like the weather; it is not a natural phenomenon that we are unable to change. It is a systematic framework, which we have created and which can and should now be changed. We have global problems that will require global solutions. In short, we need greater change to harness extremes.
We must examine the volatility of international financial markets and their speculative pursuit of short-term gain and profit, over and above the welfare of some of the world's poorest regions. Some have suggested that a global tax on currency speculation, such as that proposed by the economist James Tobin, may be an example of the regulation that could render world markets more stable and productive. There may be huge difficulties, but the idea at least deserves discussion—I put it no higher.
New forms of economic co-ordination are crucial and worthy of debate. Organisations such as the International Monetary Fund, the World bank and the G7 often operate with separate agendas. Policy making is fragmented. That is not as fanciful as it may seem; we need only to think of the establishment of new multilateral bodies such as the World Trade Organisation.
By linking such bodies to measures aimed at alleviating avoidable economic suffering—by radically reducing the debt of many developing countries, and by generating new economic facilities at organisations such as the IMF and the World bank for development purposes—we would

create the basis for entrenching global economics in a set of humanitarian and democratic mechanisms and procedures. The fundamental challenge is to improve the flows of high-quality investment that make a positive contribution to the host country's development path. That must include long-term commitment to the communities most affected by that investment.
The less-developed world needs more buying power, more aid transfers on generous terms and more intelligent support in its efforts to alleviate chronic poverty. Jubilee 2000 asserts that
for every one dollar in aid given to developing countries, eight dollars comes back in debt service.
According to the 1997 United Nations Development Programme human development report,
relieved of their annual debt repayments, the severely indebted countries could use the funds for investment that in Africa alone would save the lives of about 21 million children by 2000 and provide 90 million girls and women with access to basic services.
That is a powerful challenge to us all. Thus far, the global economy has excluded far too many. This year's UNDP human development report tells us that the poorest 20 per cent. of the world's people have been left out of the consumption explosion. Globally, the 20 per cent. of the world's people in the highest income countries account for a massive 86 per cent. of total private consumption expenditure. The poorest 20 per cent. account for a minuscule 1.3 per cent. Moreover, the least-developed countries account for about only 0.5 per cent. of world trade and investment. If that is not global exclusion, I do not know what it is.
Until the poor are brought into the international system with real influence, the global economy cannot be stable for long. The G7 countries plus the rest of the European Union represent a mere 14 per cent. of the world's population, yet those countries have 56 per cent. of the votes on the IMF executive board.
Change will not be easy, but come it must. Kofi Annan, the Secretary-General of the United Nations, has already called for a UN role in financial reform. I believe passionately that that is possible and that we must make speedy progress. For the good of the world, we need a dialogue of rich and poor, working in partnership.
My right hon. Friend the Prime Minister was right when he told us of the new role for Government in economic management, which I applaud, and measures that combat social exclusion and create a society of opportunity extended to all. We should employ the potential of all our people because we cannot tolerate a society that writes off its potential work force through poor education or social exclusion. There still remains an economic case for tackling poverty and unemployment at home and abroad.
I know that the Government recognise that we have a moral and economic duty to project and apply those arguments at a global level. We must acknowledge that it is in our own interest to offer hope to the poorest people of the poorest countries, by working towards a genuine practical solution encompassing the resources that they currently transfer. Without change, the global financial system will not lead to the prosperity that we want for developing nations and will never be realised. Hope, above all, must triumph over disenchantment.

Mr. Ian Taylor: The right hon. Member for Coatbridge and Chryston (Mr. Clarke) has obviously worked hard on his speech and thought the issues through. In respect of the Gracious Speech, he was clearly referring to the privatisation of the Commonwealth Development Corporation as one of the measures that he welcomes.

Mr. Tom Clarke: Will the hon. Gentleman give way?

Mr. Taylor: I should be grateful to the right hon. Gentleman if I could get under way.

Mr. Clarke: Will the hon. Gentleman give way?

Mr. Taylor: Of course.

Mr. Clarke: I am extremely grateful to the hon. Gentleman. First, I thank him for his kind remarks, but, secondly, all my remarks related to the third paragraph of Her Majesty's Gracious Speech.

Mr. Taylor: I am grateful to the right hon. Gentleman for that clarification, as is the House. Nevertheless, I hope that he welcomes the privatisation of the CDC, the proposal for which I was delighted to see in the Gracious Speech.
When I was a Minister at the Department of Trade and Industry I did quite a bit to achieve a leap forward for the CDC. On a visit to Havana, I was face to face with President Castro. CDC negotiations to do something to help Cuba—that exemplaire of potential capitalism under President Castro—had run into the sand. I decided to push them through as best I could, and I persuaded President Castro to remove the only remaining obstacle to the agreement with the CDC, which was the reduction of some taxes. President Castro said, "Is that what you recommend?" I said yes, and he turned to his Finance Minister and said, "Reduce taxation; we are going to sign this deal tomorrow."
That is the way that things can be done in an enlightened regime, and the CDC is still active on the island of Cuba. I hope that its new-found freedom, which was referred to in the Gracious Speech, will give it even more power to do deals. I genuinely think that the CDC does some excellent work around the world, and is clearly no longer confined to the territory of the Commonwealth.
I was not minded to refer too much to the euro, but I was galvanised by the now-absent right hon. Member for Llanelli (Mr. Davies), who decided that the European Movement was in a state of agitation because we seemed to be co-ordinated. I was also inspired, in the opposite way than he intended, by the Chief Secretary, who failed to respond to my intervention.
The reality is that it is not the European Movement that is becoming agitated; as usual, those of us who are part of it are calm and collected as we approach the first day of the euro. The people who are agitated are those who have suddenly realised that the euro is a serious, practical currency which is about to be dealt in within what is effectively 80 per cent. of the single market—the single market that we created as Conservatives, under the great leadership of Baroness Thatcher.
We created the single market, and 80 per cent. of it will have a single currency within a matter of days, yet too many people seem to think that that is something that we do not need to bother about because it is only another foreign currency, or they believe—even more alarmingly—that it is something that we have to froth at the mouth about.
Unlike the hon. Member for North Durham (Mr. Radice), I am not referring to The Sun, but to that real third-rate broadsheet, The Sunday Telegraph. It not only frothed at the mouth, but, so weak are the grounds for its argument for opposition to the euro, it decided that it had to put on the front page of last Sunday's edition an opinion poll that was largely conducted between January and April 1997. That is hardly something that would usually be contemporary enough to get on to the front page of what used to be a quality newspaper.
Far from The Sunday Telegraph headline being accurate, it revealed that, even on the terms that it expressed about its own opinion poll, opposition to the euro had reached its lowest level for quite some time. In other words, opinion was gradually moving in favour of at least considering the euro.
I know that public opinion is still against by a larger factor than I care to contemplate, but let us ask ourselves why. For a start, very few of the positive arguments about the euro have been put forward. Secondly, the Government—to be fair—are saying that they could conceive of entry and that it is a possibility, and that they have a few criteria—five, at the moment—which, although they are subjective rather than objective, could be met at any stage. Those criteria give them a fig leaf that enables them to say, "Perhaps we have to watch this for a little bit longer."
Although they are at least doing that, the Government refused to state explicitly in the Queen's Speech or in the debate—so did the Chief Secretary, when challenged by me—that their policies on the economy are designed to enable this country to make the decision to join the euro, if the other economic conditions and circumstances are correct.
Whether one is for or against the euro, we can all agree that entry will not occur by accident. There must be clear political will for it to occur, and the policies that will enable us to converge. We must prepare not only industry—which is at least mentioned in the Gracious Speech—to start dealing immediately in what will be one of the most powerful reserve currencies in the world and something that will rapidly condition the way that our domestic economy is run, but the technical aspects, which are part of conversion and preparedness.
Many companies are saying to hon. Members on the Conservative Benches—and to hon. Members on other Benches as well—that they want a clearer steer from the Government. They do not want nice, comfortable waffle and they do not want the Government to say, "Perhaps industry should take the lead, because we do not want to offend the Murdoch press." Companies want the Government to be explicit about their intentions and how they will deliver them.
How will the Government so change their fiscal policy to accommodate the fact that, if they are serious about entering the euro within a matter of years, interest rates are likely to fall? Indeed, they will have to, unless continental rates converge towards ours, something that


Oskar Lafontaine may provoke. I am afraid that my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) has left the Chamber. He concentrated on the role of Oskar Lafontaine in the European debate, but I am referring to practical matters. If interest rates in the United Kingdom are to fall, what fiscal measures will be put in place so that the economy can deliver growth and stability, which the Government have said are their benchmarks for economic management?

The other vital factor—

Sir Teddy Taylor: Will my hon. Friend give way?

Mr. Taylor: We have a 15-minute limit on speeches, but bearing in mind our long-standing friendship, of course I shall give way to my hon. Friend.

Sir Teddy Taylor: Is it not the case that there are low interest rates in Europe and rather higher ones in Britain because unemployment is high in Europe and not so high in Britain? Is that untrue?

Mr. Taylor: I am grateful to my hon. Friend, who leads me right into my next point. The euro is not destined automatically to succeed. Those of us who are prepared to contemplate entry do not also say that it must succeed because we would like it to succeed. That would require a series of clear political decisions which could influence its ability to succeed. Perhaps the euro will drift sideways, or perhaps it will fail. Failure is widely understood by those on the Conservative Benches not to be in Britain's national interest.
My hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) is right: some key decisions will be made. How will the economic and stability committee—the Euro XI—make up its mind about how management of the fiscal elements of policy should be set alongside the European central bank's management of monetary affairs? What signals will be given? Will the central bank decide that it will target an external exchange rate for the euro?
Those are big questions, and there are many more. How will labour flexibility be used? What adjustments will be made between regions and countries within a single monetary policy zone? Those of us who are in favour of the euro do not deny that those questions exist. We are saying to the Government, "What is your position on each of those issues?" If we intend to join, we must make sure that the character of the euro is something with which we are comfortable. We must make our voice and our views heard in the European Union, although we are not part of the Euro XI committee.
There will, of course, be differences between Opposition Members and Labour Members in regard to the answers to some of those questions. In what must inevitably be a short speech, I shall not go into what those differences might be; but, regardless of whether differences arise over the way in which the economy, the Euro XI committee and the central bank should govern themselves, we must contribute to the debate. A letter published in The Independent on 30 November,

which I signed, along with the Chairman of the Civil Service Select Committee—who also chairs the European Movement—states:
On the key issues now emerging—whether to adopt an external exchange-rate policy for the euro, how to operate the growth and stability pact and whether or not tax approximation may be desirable in a single currency zone—Britain's voice must be at the centre, not the margin, of policy formation.
The possibility of such an influence is a much clearer indication that the Government intend to join the currency. I urge Ministers not just to say, "Here is a positive European in the Conservative party: we can pat him on the head", but to give me—a Conservative who is also a positive European—some concrete answers. Some of us are anxious to be given such answers. If others are not prepared to ask the questions, I am. They are difficult questions, and they need careful consideration.
Over the next day or two, the European issue will continue to bubble, but by the beginning of January many people in this country will realise that something that will increasingly influence the way in which they conduct their business, and the way in which we conduct our domestic economy, is something that the British Government are fudging, in terms of commitment. Perhaps I am wrong; perhaps the Secretary of State for Trade and Industry was right to tell the Confederation of British Industry that it was "only a question of when". I should like the Minister who replies to tell me that the Secretary of State was right.
Perhaps the Secretary of State's predecessor is anxious to intervene and tell me that now, given the loyalty that exists between Ministers and their successors. I hope, however, that a clearer commitment will be given. The only reference to the euro in the Gracious Speech is a reference to the need to prepare British industry for it—and, as we have seen from an advertisement in the Financial Times last week relating to more than 100 business men and the 150 who have followed, British industry wants a good deal more from the Government than it is currently receiving. If it does not receive more, there will be considerable tensions during the next few months. Moreover, as ICI's chief economist has pointed out, if we are likely to be out of the euro for a protracted period, that will have a severe effect on British investment decisions, which can mean only one thing: more British companies will decide to locate within 80 per cent. of the European single market, rather than in the United Kingdom.
I would have liked to say more about the role of technology. The Government have done a constructive job in highlighting some of the issues that I tried to highlight when I was a DTI Minister, relating to the role of technology in the economy. Electronic commerce is incredibly important, and, if we do not do what is necessary to provide the right framework, the nation will suffer economically—in terms of every aspect of the economy. I know that Conservative Front Benchers are a little more hesitant, but I welcome the move to try to provide a framework for digital encryption and digital signatures. Without those, we shall not benefit from the advances that may be made by the United States and other competing economies.
The development of electronic commerce will be monumental. At present, at least 100 million people are connected to the internet; only 40 million were connected in 1996. That rapid expansion demonstrates


the importance of the internet to the United Kingdom economy. I hope that the Government will continue to concentrate on the issue, and will give us further details.

Ms Ruth Kelly: It is always an honour to speak in one of the debates on the Gracious Speech, especially when the Gracious Speech features such an ambitious agenda.
The right hon. Member for Horsham (Mr. Maude) said that the second Gracious Speech of a new Government should involve the maximum purposeful activity. I asked myself what he meant, and, having looked at the Gracious Speech, could only conclude that it involved precisely that. In what other way could we describe a programme that introduces, for the first time, a working families tax credit that will make work pay for thousands of families? How else could we describe a programme that will introduce a minimum wage that will set a floor for earnings, and will end the scandal of in-work poverty pay? The new deal has already created opportunities for thousands of young people, and I am delighted that it is to be extended to cover even more groups.
I consider the macro-economic agenda equally impressive. The Government are taking action to create an economy that is capable of sustained and steady growth. It is essential, over the next year, for them to build on what they have already achieved, steering a careful course even when growth in world trade has fallen by two thirds.
I welcome the Government's commitment to new fiscal rules and to more transparency in our national policy-making, but I believe that vigilance in national economic policies must be matched by a willingness to reform the international financial system to secure greater international stability. The Opposition may argue that the slowdown forecast for Britain was made in Downing street, but it is clear to all but a few that the impact of the crisis in east Asia has reverberated across the developed world. We ignore at our peril the fact that a quarter of the world economy is now in recession, including the economy of Japan. The right hon. Member for Horsham mocked the Chancellor's attempt to forge a new financial infrastructure for the global economy. In that, too, he is isolated and increasingly extreme.
I was very interested by the speech of my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke), and intend to build on some of what he said.
A key challenge for the Government over the next year must be the devising of new international rules of the game to build confidence and credibility in the global system. It is worth recalling the remarkable growth that has taken place in the foreign exchange markets over the past 25 years. Since 1973, the foreign exchange market has grown fourteenfold, thriving in a world free of capital controls. The $1.3 trillion traded daily in the foreign exchange market that was registered in 1995 represents an increase of 50 per cent. since 1992. Unfortunately, however, the global financial infrastructure has become increasingly outdated.
The events of the past few months have demonstrated the deep-rooted inadequacies of our understanding of the relationships between financial markets and between countries—especially in regard to developing, emerging market economies, the quality of risk assessment and gaps

in the international regulatory structure. That is why it is particularly appropriate for the Chancellor to be at the forefront of international attempts to rethink the financial institutions. I accept that capital market liberalisation can bring enormous benefits to developing countries. The theory is that freer capital markets can give developing countries access to global savings, so that they can invest more in order to grow faster. Until recently, Asia seemed to prove that case.

Mr. Shaun Woodward: I recognise the efforts that the Chancellor may be making outside the United Kingdom. However, as we heard today from my right hon. Friend the Member for Horsham (Mr. Maude), 1,200 jobs were lost today at the Courtauld textiles factory, and only last week—on black Friday—4,000 jobs were lost. What does the hon. Lady think should be done to protect jobs at home?

Ms Kelly: The hon. Gentleman completely misses the point. Does he not realise that 400,000 jobs have been created since the Government came to power, that interest rates are falling and that the inflation rate is on target for the third time? It is time to look at our domestic economic policies to see how that transparency can be injected into the global financial system.
It is clear that capital liberalisation can bring important benefits to developing countries, giving them access to savings that they might not otherwise have had. As east Asian countries erased capital controls during the 1990s, they enjoyed inflows of money amounting to between 5 and 10 per cent. of gross domestic product. That went hand in hand with faster growth, but fast liberalisation of capital markets can have its dangers. The 1990s witnessed a movement of capital to emerging market economies on a scale relative to GDP not seen since the gold standard era of the late 1880s to early 1900s.
Let us take the five countries that have been most damaged by the recent crisis—Indonesia, Malaysia, South Korea, Thailand and the Philippines. Between them, they had net inflows of $41 billion in 1994. By 1996, that had jumped to $93 billion. Over the years, inflows substantially exceeded the current account deficit, allowing Governments to accumulate $37 billion in additional reserves.
When panic hit last year, the net inflow turned into an estimated outflow of $12 billion. The swing in the net supply of private capital was a staggering 10 per cent. of the combined pre-crisis GDP of the five economies.
The response has been dramatic. Countries have had to slash domestic spending and rein back trade deficits, sometimes sharply. Malaysia has so far been alone in reimposing capital controls to shield itself from the frenzy of the markets and to buy itself some breathing space, but, by doing so, it deepened the crisis in other parts of the region, and undermined confidence among international investors in east Asia even further.
Many commentators, including the International Monetary Fund, have blamed the emerging market economies themselves for their problems. They have argued that any international help should be accompanied by even greater capital liberalisation and yet harsher economic policies, policies that the eminent United States economist, Paul Krugman, describes as "playing the confidence game"—trying to win back the confidence of the international markets.
Of course, the IMF is right in some respects. Some of the problems were home-grown and valuable lessons have been learnt. The evidence suggests that the extent to which capital movements are destabilising depends largely on the strength of a country's financial system and the soundness of its economic policies, but how on earth can anyone argue that the punishment that those countries face fits the crime? What the crisis has exposed far more than any policy "crimes" is the inadequacy of the international financial system in the face of an increasingly interdependent global economy, in which capital flows are virtually instantaneous.
For 50 years, our policies for regulation, supervision, transparency and—yes, I will say it—stability have been devised and developed for a world of relatively sheltered national economies, with limited capital markets. Now that markets transcend national boundaries, that system needs to be completely rethought. I congratulate the Chancellor on playing his part in international forums that are trying to do that.
What is now called for is a new Bretton Woods—not a system of fixed exchange rates, like the old system, but a new financial infrastructure. The Chancellor was right to underline the need for greater transparency and openness, including the implementation of codes of practice and conduct in monetary and fiscal policy and corporate governance. Those should strengthen incentives on Governments to pursue sound economic policies and enable market participants to price risk more effectively.
Financial supervision and regulation must also be improved and early warning mechanisms put in place to help to prevent further crises. Short-term mechanisms must exist in case crises do strike, with the international community able to mobilise capital quickly to underpin economies of countries whose policies are clearly sound.
Although we should recognise the benefits of free capital movements, international leaders and developing economies need to approach the concept of capital market liberalisation with a little more caution. As long as countries are open to massive movements of hot money, there will be problems. As long as capital flows freely, nations will be vulnerable to speculative attack and policy makers will be forced to play the confidence game.
Of course, it is not easy to limit the movement of international capital, at least not without threatening the strangulation of international trade, but we cannot sanction a system that allows developing countries to be exploited by foreign capital that they do not need and which then forces them to resort to panic controls on capital outflows when crisis hits.
I have been an advocate of a small tax, devised by the Nobel laureate, James Tobin, on foreign exchange transactions. That would make speculation more costly, while having little effect on long-term investment, but I accept some of the criticisms of the tax. Enforcement would be difficult and it would not necessarily solve problems such as have arisen in east Asia, where the biggest sellers of local currencies were not speculators; they were local firms desperately trying to hedge or to repay debts denominated in dollars. However, we could act to protect developing markets from the sort of onslaught that we have recently witnessed by encouraging

them to liberalise their capital markets more slowly and cautiously. There are encouraging examples of the dividends that can be reaped from caution.
Take Chile, for example. In 1982, it had a crisis strikingly similar to that in east Asia. Since then, despite being a robust supporter of the free market, it has actively sought to discourage short-term inflows of foreign capital. All loans and bank deposits from abroad are, effectively, taxed. When a company borrows abroad, for example, 30 per cent. of the loan must be deposited for one year in a non-interest-bearing account at the central bank. The controls are likely to explain partly why Chile has enjoyed steadier growth than most other emerging economies over the past decade.
Would it not have been preferable if Thailand and Indonesia had restricted borrowing from abroad in a like manner, rather than encouraged it? Perhaps South Korea might have avoided such a run on its reserves if controls on short-term borrowing had limited its exposure to foreign banks.
Once financial and regulatory systems are well established, capital markets can be opened fully, perhaps with a new world financial authority standing ready to police global capital flows, ensuring that the necessary international standards are in place. In the event of a crisis and where a country adopts good policies, I would like a world financial authority to sanction temporary debt standstills by lending into arrears.
As Jean-Michel Camdessus, the IMF managing director, has put it, the IMF's goal should be to ensure that the world has adequate protection against the risks of globalisation, together with the chance to embrace the opportunities it provides. That should be our goal too.

Mr. John Horam: I was interested in the remarks of the hon. Member for Bolton, West (Ms Kelly), but may I bring the House back to the broader canvas of the immediate problems that are addressed by the Queen's Speech?
The Chief Secretary to the Treasury attempted to give his remarks some sort of theme by using the word "modernisation". Modernisation is a totally empty concept. It can include anything that we say has changed. It does not address the Labour party's traditional problem of finding a way in which to improve the mechanisms for delivering economic growth.
When Jim Callaghan, now Lord Callaghan, was Chancellor of the Exchequer and addressed the Labour party conference—the President of the Council and Leader of the House of Commons may recall this—Hugh Scanlon, no less, stood up in the middle of his peroration and said, "Aye, but Jim, where's the mechanism?" Callaghan reached behind the podium and, with a rather oratorical flourish, waved a document and said, "Here, Hugh. Here's the mechanism." It was the national plan, which lasted about another three months. That is the Labour party's traditional problem in addressing economic problems.

Mr. Woolas: Will the hon. Gentleman give way?

Mr. Horam: We are on a time limit. I am sure that the hon. Gentleman will forgive me.
The Labour party does not understand the need to address continuously the mechanisms for delivering economic growth. The Queen's Speech shows its lack of thought in that respect.
The great strength of Conservative Governments in the 1980s and 1990s was that they understood the importance of addressing and readdressing the supply side problems of the economy and coming forward with specific measures to help. Thus it was that we denationalised, deregulated and lowered taxes, all of which had a strong positive effect on economic performance, such that Paul Ormerod—no defender of the Conservative party—was able to say in his recent book that a great triumph of those Conservative Governments was to establish a framework for enterprise. That is precisely what we did.
The enterprise framework created by the Conservative Government was widely admired abroad, and other economies adopted the privatisation methods pioneered by that Government. The hon. Member for Bolton, West was talking about international economics. The Indian economy, for example, has been released totally by finally forsaking London school of economics-Fabian-socialist economics and adopting a sensible market approach.
The Conservative Government of those years tackled not only the private sector but the public sector. That reform, indeed, was modernisation and creation of a method of delivering services that was recognised around the world as pioneering. When I was a Minister in that Government, we reckoned on reducing public sector costs by at least 30 per cent. every time we put something out to competitive tender. Equally, over 10 years, using those means, public sector costs were reduced by £1 billion. Over 10 years, the number of civil servants was reduced from 1 million to 750,000.
We did not stop that work even when a general election was imminent. When I was at the Cabinet Office, for example, we continued—within a year of the previous general election—to privatise Her Majesty's Stationery Office, the Recruitment and Assessment Service and the occupational health service. When I was a Health Minister, we managed to get the NHS supplies company to a point at which it could be privatised. In only the last year of the previous Government, my right hon. Friend the Member for Henley (Mr. Heseltine) continued with his deregulation, abolishing 1,000 regulations.
Politically, perhaps all that was done foolishly, as we were accused of trying to do too much while electoral defeat might have been staring us in the face. At least it showed that that Conservative Government were committed to using the power they had for positive purposes, and for the good of the economy and of the British people. I was proud to be associated with that record, which I should be happy to defend.
I was appalled by the Queen's Speech because of its absence of such a drive to make improvements, which seem to have dried up to a trickle. However, there is one exception. I congratulate the Government on one rather technical matter that no hon. Member has mentioned in the debate. The Queen's Speech states:
A Bill will be introduced to transfer the Contributions Agency to the Inland Revenue, paving the way for better and simpler collection of National Insurance Contributions and tax.

I warmly welcome that very good measure and simplification. Labour Members may not be aware—even Ministers, as they do not see the papers of the previous Government, may not be aware of it—that I myself spent three years at work on the matter. Undoubtedly, a similar measure would have been introduced had a Conservative Government remained in office. However, I unreservedly welcome that part of the Queen's Speech.
Most of the other paragraphs in the Queen's Speech—such as that on new trade union legislation—will have a retrograde effect. The Speech states that the Government
will bring forward measures to establish a forward-looking balance of rights and responsibilities".
"Forward-looking" is an interesting spin on a measure that is precisely backward looking, in bringing back measures that had been abolished to help the economy. Nevertheless, in an astonishing piece of pedantry, Ministers call it forward looking.
The Queen's Speech states:
My Government will introduce legislation to modernise local government in England and Wales and secure delivery of high quality local services on a sound financial footing.
Of course that means dropping competitive tendering, which is called something different now—value for money or something like that. The fact is that the drive to reduce costs and to outsource properly and sensibly in local authorities will go. The commitment to reduce costs will be eliminated.
The Queen's Speech states:
Regional Development Agencies will be established in England, decentralising decision-taking to the English regions.
It is another piece of bureaucracy and interference in the planning mechanism. The other day, the Secretary of State for Trade and Industry was making much of the McKinsey report on productivity and efficiency. However, one of the points in the report was precisely that the planning mechanism inhibits enterprise. Now Ministers are introducing another element into current United Kingdom planning mechanisms. It is very strange proposal to promote economic growth.
The Queen's Speech states:
Legislation will be introduced to create a new Greater London Authority … There will be a range of powers to make London a world class city".
There will also be an industrial development agency for London—what nonsense! We need such an agency like we need a hole in the head—as if we do not already have enough support for industry in our capital city. It will simply complicate the business of releasing enterprise.
Like other hon. Members, I welcome legislation to create a financial services authority. We go around that course again every 12 years or so, but it is very important that we get the legislation right. I support other Conservative Members in saying that, so far, there has been scant evidence that the draft legislation either is finished or will deal with many of the problems.
I should like to draw an important point to the attention of the House. I have a report from the Real Time Club, entitled "Funding Technology-Based SMEs—Key issues to be resolved in the 1998/9 Financial Services Act", which states:
Following a series of investigations by the Bank of England and others, it is now generally agreed that technology-based SMEs, particularly in their early stages, have considerable difficulty in


obtaining adequate funding. As a consequence the UK economy loses out in the creation of wealth, in new jobs, in the balance of payments, and in forgoing tax revenues … The paper therefore proposes that the current review being undertaken in the context of the forthcoming 1999 Financial Services Act should be used to remedy these deficiencies.
All the information that I have from sources close to the current negotiations and discussions reveal that Ministers have taken on board none of the points made by those who are well versed in that extremely important issue. I hope that the Paymaster General is listening to the comments on the issue—rather than reading a rather extensive tome—because he can do something about it.
Technology-based small and medium enterprises in the United Kingdom are not receiving the right funding. In providing funding, we are well behind the United States, and we are increasingly falling behind many countries in Europe. If the Paymaster General would like to address those issues before the financial services authority Bill is introduced, the House should be grateful to him. Some progress must be made on the issue. However, from the information that I have, I believe that there is scant evidence that any is being made. The Government are not listening to the serious points being made by people who know a great deal about the matter.
The sad thing about the Queen's Speech is that it does not deal with the United Kingdom's fundamental economic problems—which is what we are debating today—or command confidence. I agree that many of the measures that I have mentioned—like an increase in interest rates or taxation—will not come into effect and have consequences for the economy immediately. However, over time, the failure to keep up with the drive to continue making improvements in the supply side of the economy, and the introduction of measures to restrict and impose costs on the supply side, will insidiously erode the enterprise culture so successfully established by the previous Government. Therefore, despite all that the Prime Minister would like us to believe, I do not think that they are a modern and reforming Government.

Mr. Mark Fisher: I am grateful for the opportunity to speak in tonight's debate. I hope that the hon. Member for Orpington (Mr. Horam) will forgive me if I do not follow him down the curious byways of his selective memory and his interesting political career.
Between 1983 and 1985, I was a member of the Treasury Select Committee, but having spent 13 years on the Front Bench developing policy on just one issue—the arts—I welcome the opportunity to resume my contribution from the Back Benches to the somewhat wider debate on the economy. However, I wish that it were taking place in happier circumstances.
There is too much evidence, which has been rehearsed by hon. Members on both sides of the House, that economic storm clouds are gathering around the world. The reasons for this darkening situation are beyond the control of any one nation, even the United States, but that makes it all the more important that we do all that we can by way of economic and fiscal policies to put our national economy in the best possible state to withstand any

damage. That is why my right hon. Friend the Chancellor is absolutely right to press for reform of international economic institutions, not to cut public expenditure, to work as closely as possible with other European Finance Ministers and to do as much as he can to prepare for economic and monetary union.
As my right hon. Friend the Chief Secretary to the Treasury said at the start of his speech, the main theme of the Queen's Speech is modernisation—as essential a contribution as any to preparing the economy for the hard times ahead. Indeed, the word "modernise" appears no fewer than 11 times in the text. It is used to describe the Government's approach to the law, the welfare state, local government, parliamentary and constitutional reform and industry. After 18 years of poor government, it is vital that we tackle the neglect of our predecessors, but using one word in so many contexts is not necessarily an aid to clarity.
What do we mean by modernisation, particularly in relation to industry and the economy? In our first Session, we cut corporation tax, introduced a national minimum wage and gave independence to the Bank of England—all modernising and very necessary initiatives.

Mr. Woodward: Will the hon. Gentleman give way?

Mr. Fisher: I am limited to 15 minutes. I am sure that the hon. Gentleman will be able to make his own speech.
In this Queen's Speech, the Government address the growth of electronic commerce. On Wednesday, my right hon. Friend the Secretary of State for Trade and Industry told the House that we had to adapt our legal and regulatory environment from one that addressed the needs of trade and material goods to one that met the requirements of electronic commerce. He called for a national crusade to make us world leaders in internet business. I welcome that.
At last the Government recognise the commercial importance of information in a way that quite eluded Ministers in the previous Administration, with the honourable exception of the hon. Member for Esher and Walton (Mr. Taylor), who spoke earlier. His Cassandra-like warnings that we were being left behind in the race to develop new technologies were ignored by his ministerial colleagues. That market, which is conducted in the English language, is growing every day, is already generating substantial profits and can play a major part in reducing costs. For example, the electronic booking of an airline ticket can reduce the cost of the transaction from $8 to $1. However, I hope that we are not so glamorised by the thrill of the new star, electronic commerce, that we allow the old trouper, manufacturing industry, to shuffle off the stage. That there could or should be a choice between them is a delusion.
Although it is not a fashionable view, I believe that manufacturing remains of great importance to our economy. Lady Thatcher and Lord Lawson refused to accept that. They looked at the statistics and pronounced the terminal decline of manufacturing, declaring that we were a service economy. That was a simplistic judgment which we must not repeat in our pursuit of modernisation.
It is true that, partly as a result of the policies of the previous Government, manufacturing jobs fell from 6.75 million in 1979 to 4.8 million in 1986 and to just over 4 million today. It is also true that growth in


manufacturing, which, on average, has been 1.8 per cent. a year since 1986, is well behind growth in services of 3 per cent. a year and growth in the general economy of 2.5 per cent. and that the contribution to general domestic product of production industries of 25.4 per cent. compares unfavourably with that of the service industries at 67.9 per cent. However, the figures conceal a more complicated and, I believe, more positive picture.
The service sector is not, as it may appear, a coherent whole. It is made up of a number of disparate parts: transport, communications, leisure, catering and financial services. Our economy continues to comprise three major players: finance and the financial sector, at 22.4 per cent.; public administration, at 22.2 per cent.; and manufacturing, at 20.6 per cent. We cannot afford to ignore the importance of manufacturing industry. Crucially, manufacturing remains central to our balance of trade and export performance as it contributes 63 per cent. of total exports. That percentage has been constant over the past decade, compared with the contribution of services of between 20 and 30 per cent—last year, it was 24 per cent.
To maintain that export performance, manufacturing industries, such as ceramics in my constituency, have not waited for the Government's call to modernise.

Mr. Woodward: Will the hon. Gentleman give way?

Mr. Fisher: I am sure that the hon. Gentleman will have the opportunity to make his own speech. I would have been happy to give way had it not been for the 15-minutes rule.
Manufacturing industries have done much to modernise products, develop new markets and harness new technologies such as robotics in production and computer-aided design to improve productivity.
What role is there for the Government to support the modernisation that is already taking place? In recent months, the CBI, employers' organisations, such as the Engineering Employers Federation, and almost all the trade unions have called for a cut in interest rates to reduce the level of the pound. Although the recent cuts are welcome, they are not sufficient. I believe that more would be beneficial, and they will come. The reason for caution that the Governor of the Bank of England consistently gave throughout the summer was the desire to avoid overheating the economy. Sadly, that is no longer a problem. Nor would a cut in interest rates be an artificial help to manufacturing industry; it would be good sense. It is in our national interest that the goods that we produce, as long as they are well designed, well marketed and competitive in every other way, should be able to compete, particularly in Germany, France and Italy, without being inhibited by the level of the pound.
The economy generally and manufacturing industry in particular would be helped if the Government widened the remit given to the Bank of England as part of its new independence to consider factors such as growth and employment as well as inflation. As hon. Members have said, Dr. Alan Greenspan's remit at the Federal Reserve bank is considerable wider than that of Mr. Eddie George.
Perhaps of even greater general importance to manufacturing industry is the Government's attitude. If they can bring the same concern, energy and

imagination to manufacturing industry as they are undoubtedly bringing to electronic commerce and new technologies, that will be a huge improvement.
I would have liked to relate the theme of modernisation in the Queen's Speech to one piece of legislation that will not be introduced this year—a freedom of information Bill. It is a crucial element in modernisation and could be important in helping industry and therefore the economy. Freedom of information legislation could have helped the previous Government to identify some of the problems of bovine spongiform encephalopathy far earlier, thus avoiding much of the consequent damage to agriculture. However, the 15-minutes rule is against me and I look forward to plenty of opportunities in this Session to participate in the scrutiny of the draft freedom of information legislation that the Queen's Speech promises. I welcome that as an imaginative and important way of airing the difficult choices that lie behind the introduction of such legislation.
I look forward to the Government's implementation of the Queen's Speech and to a Queen's Speech next year that includes legislation on freedom of information and, I hope, some evidence of a sustained revival in manufacturing industry. Both contribute to the modernisation of society that my right hon. Friend the Prime Minister has set as our goal and both will demonstrate that modernisation is not a catch-all or a mantra, but a complex process with many facets through which we can and will enrich our society and our economy if we learn the lessons of the past as well as looking to the future. I believe that it will prove to be the best bulwark against the hard economic times whose shadow is, I fear, spreading across the globe.

Mr. Steve Webb: The majority of speeches so far have concentrated on the macro-economy and the euro. I want to concentrate on a central plank of the Government's economic policy that has been mentioned, only briefly, by the hon. Member for Bolton, West (Ms Kelly) and the right hon. Member for Fylde (Mr. Jack), who is no longer in his seat: the working families tax credit.
The working families tax credit puts me in a quandary. It is £1.5 billion for the low paid. Perhaps low paid is stretching it a bit, given that it will reach higher rate taxpayers, but in principle it is for the lower paid. On the whole, I tend to favour extra money for the poor and the low paid. However, that is about the only good thing that I can say about the scheme, because it is incredible how little evidence there is for the Government's views on how that £1.5 billion should be spent.
It is said that the working families tax credit will make work pay. That sounds laudable. It is said to be good for work incentives. Whom is it supposed to encourage into work? It applies to only two groups—lone parents and working couples or couples with children. The biggest barriers for lone parents are not primarily low pay or the incentive structure, but the availability of child care and jobs. In the debate some months ago on cutting lone parent benefit, the hon. Member for Cynon Valley (Ann Clwyd) said that there were barely any vacancies at her local job centre, but there were dozens of lone parents looking for work. The failure to tackle the supply of jobs will not help incentives.
There is a more fundamental issue. The Chancellor has cut the taper in the working families tax credit. Clearly, that will mean that fewer people will lose 70p in the pound at the margin, but more people will lose 50p in the pound at the margin. Is that unambiguously good for incentives? Where is the evidence? The Chancellor has not put any forward and I do not suppose that there is any. It is an act of faith.
What about the argument that paying the benefit through the pay packet rather than through the social security system will reduce stigma? Where is the evidence for that? The money will still have to be claimed. Where is the evidence that the take-up of the working families tax credit will be greater than the high take-up of family credit? There is none.
The key evidence that we have is that, when people on income support are asked what the biggest barriers are to moving off income support, they talk not about child care or the lack of in-work benefits for being a family, but about the lack of help with housing costs. If they take a low-paid job, they lose help with their mortgage or their rent rebate falls rapidly. The Government have missed a golden opportunity to address that. Those who take a low-paid job will lose all help with their mortgage. That is why people in my constituency tell me that they cannot afford to take a job. They will get a little extra help through the tax credit, but that will not come anywhere near covering mortgage repayments of, say, £400 a month.
What about child care? The child care subsidy seems to have been structured bizarrely. It will take us right up to the reaches of higher rate taxpayers. How can it be rational for state subsidy to reduce the cost of child care for higher rate taxpayers? The state will pay up to £100 a week towards the child care costs of children being looked after by their grandparents, provided that the grandparents jump through the hoop of becoming registered child minders. That is insulting on two grounds. First, why should the state be involved in subsidising grandparents looking after their grandchildren and, secondly, why should grandparents have to show that they are any good at bringing up children? It is bizarre for the state to be involved.
One of the key issues of the working families tax credit is paying it through the pay packet, typically to the man in a couple. In 80 per cent. of family credit cases, the principal breadwinner in the couple is the man. The Government were embarrassed about that initially and conceded that there would be choice for families, but there are fundamental problems. It will be in the families in which men are not good at passing on money to their wives that the women will have difficulty exercising the choice for the money not to be paid through the pay packet. I predict that the Government will weight the dice to ensure that the system discourages people from opting for anything other than payment through the pay packet. If large numbers of mothers opt to have the money paid through the benefit system rather than the pay packet, will not the Government's fundamental argument—that the big point about the tax credit is that it is better for incentives because there is no stigma because the money goes through the pay packet—be undermined? I intervened on the Chief Secretary on that point, but he did not really respond.
If most of the money does not go through the pay packet, why bother with the administrative mess of the tax credit? We could have the extra money, the lower tapers and the child care assistance through family credit. The key difference between family credit and the tax credit is the use of the pay packet, which the Government are letting people opt out of, so what is the point?
When fraud was mentioned, the Chief Secretary was dismissive of the right hon. Member for Birkenhead (Mr. Field)—rather rudely, I thought. The right hon. Member for Birkenhead has a strong reputation for pursuing fraud in the benefit system and the tax system. The key issue is to design systems so that fraud is not an integral part of them. The American evidence on fraud is embarrassing. There was a huge fraud industry associated with the American tax credit scheme. There is every possibility that the same could happen with the British tax credit scheme. For a Treasury Minister to dismiss the issue as the rambling of a has-been is outrageous.
A thought that might be dearer to the heart of the Paymaster General, who is on the Treasury Bench, is the cost to business of administering the working families tax credit. Many small firms will have perhaps one or two employees on relatively low pay. They will have to pay out more on the working families tax credit than they hand over to the Treasury in income tax and national insurance. It has been said that they can claim the money back, but how far in advance can they do that? When will they know how much they have to pay? Wages go up and down as people join firms and others leave. How can small businesses know in advance how much tax credit they will have to pay if the amount keeps changing? Will they have to predict a month in advance to ensure that there is time for the money to come through? How will the cash flow problems of small businesses be addressed? The problem for small businesses is one of the many issues on which we have not yet had an answer. I hope that the Leader of the House will tell us when she sums up that, when the Bill is presented to the House, some of those issues will be addressed rather than brushed under the carpet.
My final point on the tax credit is the way in which it will work during periods of relationship and family breakdown. Family credit goes almost exclusively to the mother in a couple, who is typically the person with responsibility for the children. That is right. Suppose that the Government get their way and the tax credit is paid principally to the father through the pay packet. What happens when a relationship breaks down? We are not necessarily talking about marriage—although marriages also break down—but about any form of cohabiting relationship. Presumably the woman, who may have been a victim of domestic violence, has to contact the authorities to say that she is no longer living with her partner. The authorities then have to contact the employer, who tells the man that he will not be paid any tax credit that month. When he is told why, he says that he is still living with his partner. What happens then, how long will it take and what will the woman live off in the mean time?
The working families tax credit is dogma. It is American, so it sounds good, it sounds new, it sounds modern. It uses the tax system. A negative tax sounds good whereas dreadful old welfare sounds bad. There is precious little evidence to back up the suggestion that it will be any better than similar improvements to family credit would have been. Putting more money into family


credit with lower tapers and a better structure of child care would have been admirable. Why all this nonsense about paying it through the pay packet, paying it to men and putting burdens on business? It has not been thought through. I hope that the new Bill will be an improvement on what we have heard so far.

Mr. Alan W. Williams: I welcome the content of the Gracious Speech, including the proposed legislation on the working families tax credit. I have not looked at it in detail, but I am fully aware that it is targeted on low-paid workers and will provide up to £220 a week free of tax. That will mean a minimum of £5.50 an hour for a low-paid worker with one child and of £6.40 an hour for an adult with two children, and that will help to make work pay and to eliminate the poverty trap. I very much welcome those measures.
In the economic arena, I welcome the Bill on financial services and the markets. We know that much better regulation is needed in the City—in the stock exchange and in Lloyd's—and I am sure that the Bill will accomplish that.
The debate has been general, covering many aspects of the British and world economies. I shall direct most of my comments to the prospects for our economy over the next few years. We are all aware that a difficult year lies ahead, partly because of the high pound which we inherited but which went even higher as interest rates were increased and as sterling became a safe haven for those speculating against the euro and the Asian currencies. However, we are now recovering from those problems. Interest rates are falling and the pound has dropped 10 per cent. from its peak value back to the level that we inherited.
Global problems—in Asia, particularly Japan, in Russia and to some extent in south America—mean that the growth forecast for next year has been revised down to 1 to 1.5 per cent. We all hope that that growth will be achieved but other forecasts challenge whether it will be—we shall have to wait and see.
I am pleased that, in the thick of things next year, there will be a large reflationary package at the very time that one is needed—the £40 billion for health and education will come on stream from next April. That will involve capital expenditure, which will be a big boost for the construction industry and those who manufacture health care equipment, for example. It will also involve labour intensive employment, as more teachers, nurses and health care workers will be needed. It will inject demand into the economy at a time when manufacturing continues to face problems.
The minimum wage will also take effect from next April, and that will help hundreds of thousands of low-paid workers. The £2.95 extra in child benefit will particularly help young people with families, who are among the poorest in the community. Those measures will be socially progressive and redistributive; by giving greater spending power to poorer people, they will also help to sustain the economy.
Looking further ahead, I think that interest rates will unquestionably fall, first to 6.75 per cent. Labour Members and people outside the House—from industry and from the trade unions—are calling for further reductions.
In his comments to the TUC last September, Eddie George made it clear that the 2.5 per cent. inflation target was symmetrical—when inflation is more than 2.5 per cent., the Monetary Policy Committee must raise interest rates, but when it seems as though it will in 12 or 18 months be less than 2.5 per cent., the judgment must be to lower interest rates. The system contains an automatic stabiliser. Opposition Members have magnified the doom and gloom this evening; they have tried to talk us into deep recession. However, if what Eddie George says is true, we can look forward to interest rates reducing to 6 or even 5 per cent. by the end of next year.
As interest rates fall, there will be a boost to economic growth. I am sure that Treasury forecasts for 2000–01 are based on the underlying assumption—it cannot be spelt out, as the Chancellor may not reveal market-sensitive figures—that interest rates will fall to below 5 per cent. in one or two years, and that will stimulate growth.

Mr. David Ruffley: Will the hon. Gentleman give way?

Mr. Williams: I will not, as so many Labour Members want to speak and I want to confine my remarks.
The fact that the 2.5 per cent. inflation target is symmetrical makes it much wiser than the target of the European central bank. The European economy generally is suffering. One of the dangers for the euro is that the European target is for an inflation rate of less than 2.5 per cent. There is no automatic mechanism whereby, when inflation is at 1.5 or 1 per cent., interest rates will be reduced. In Germany, for example, interest rates are holding up despite the fact that inflation is not a problem—it is virtually zero—whereas unemployment certainly is one.
I hope that, over the next few years, through the influence of Oskar Lafontaine and eventually ourselves, the European central bank will operate on the same terms as the Bank of England, so that interest rates are automatically reduced to stimulate demand when the rate of inflation falls below its 2.5 per cent.
I believe that, in three to five years, the problem will be how to control the boom. Interest rates are destined to fall to 6 or even 5 per cent., but we want Britain to be able to join the euro by the time of the next general election, so interest rates must have fallen not only to 4 or 3 per cent. but to whatever level European interest rates are in 2001.
If the Bank of England reduces interest rates too rapidly, there is a real danger of an uncontrolled boom in property and land prices. However, we have dealt with the problems that may arise in the next 12 months very well thanks to the package of public expenditure that will come into effect next April. The problem at the time of the next general election will be how to control the demand that will be injected into the economy when interest rates fall to 4 and 3 per cent.
On the euro, there is no question but that the European economy needs massive reflation and a co-ordinated expansion. On the world scene, Europe has a balance of payments surplus of $100 billion, whereas the United States carries a deficit of $200 billion—and thank goodness for that, as it is propping up the world economy. We need expansion in Europe not only to absorb Asian goods and the exports of countries that are drifting into deeper recession, but to provide employment for our people.
I know that the Government's policy is to encourage at European summits a strategy for jobs, growth and economic expansion. The slack exists for that and the world economy requires it. I feel that 1998–99 will be difficult but, beyond that, I am very optimistic that the Government are on track for solid growth and achievement in Britain's economy.

Mr. Peter Viggers: I hope that the hon. Member for East Carmarthen and Dinefwr (Mr. Williams) is right in his positive approach to the economy, but I take the gloomy end of expectations. No former Soviet Union country has yet got back to its gross domestic product of 1989, and their targets mean, if they are successful, that they will return to such levels in about 2002. Similarly, Indonesia, where we are the largest investor, is at a standstill and Japan's problems remain unresolved. The particular importance of all this to the United Kingdom is that we are proportionately the largest exporter among all the major countries. If other countries cannot afford to import, we will be proportionately the heaviest losers. The Chancellor of the Exchequer is not responsible for economies overseas but he is responsible for his forecasts, for sticking to one that no one else believes and, above all, for the blunder of fixing public expenditure for three years in his first Budget. He will live with that for the next two years.
I want to restrict myself to the matter in respect of which the Government probably raised the highest hopes about thinking the unthinkable: pension provision. The right hon. Member for Birkenhead (Mr. Field) was given the brief of following through the Labour party manifesto pledge to
lay the foundations for a modern welfare state in pensions and community care.
After an unhappy 18 months, he found it necessary to leave. This is a crucial, much misunderstood sector. I have a declarable interest in that I am chairman of a pension fund. I am not a beneficiary but it gives me an interest in the subject.
The issue is urgent. A recent NatWest survey showed that a weekly income of £179 a week per person is needed to provide what was defined as "financial contentment" in retirement. A pensioner with less than £106 a week would face financial difficulties. On that basis, one in five people currently working are heading for a comfortable retirement, half are heading for financial difficulty, and a third will be entirely reliant on state benefits. If we compare the figure of £179 for a comfortable retirement with the single pension of rather more than £70 and the couple's pension of rather more than £110, plus income support if relevant—if that is paid, council tax and rent will also be paid—we are way off the level necessary for comfortable retirement.
The half of the population that is funded in pension schemes is well funded. Britain has about £850 billion in pension assets, which is equivalent to 77 per cent. of GDP, compared with a tiny 7 per cent. in France and 14 per cent. in Germany. There is a growing gap in pension provision that the Government, if they were compassionate, would deal with.
I am sure that there is a significant lack of understanding among people about pension provision, partly because it is a long way off and not something that they can really grasp and partly because the sums of money involved are very large. Take the single pension of £70 and consider how much it would cost to increase it to the amount deemed by NatWest to provide comfortable retirement: another £100 a week. To fund that, we need to apply a multiplier of about 16, so £80,000 would be required to yield the necessary £5,000 a year to make someone up from current pension provision to the amount deemed to be comfortable. The amounts are large.
What have the Government done? What could they do? I recognise that this is not the policy of either party, but I believe that it is necessary to increase the basic state pension. When the Conservative Government linked the basic state pension to prices rather than incomes, it was necessary because it was a crucial ingredient in our fight against inflation. However, the comparative diminution of the state retirement pension has gone too far and an integral part of pension planning should be to increase it.
Secondly, we must help those with the lowest incomes to enable them to provide for their own pensions. Significant amounts are involved: something like 15 per cent. of income is necessary to build up that sort of funding. The first tranche of support that an individual at the lowest level gives to his pension merely raises him to the means-tested benefit and so is completely wasted. He would get nothing back for it if his contribution did not take him comfortably above the means-tested level. Compulsion is clearly a necessary element, or there would no reason for the poorest to save for retirement.
In dealing with this conundrum and planning the way ahead, the Government are committed to
deliver significant savings over the longer term
from the social security budget. We have a conflict: better pensions versus significant savings—how to square the circle. I believe that it can be done. The authority that I quote, rather to my surprise, is Lady Castle, who wrote with Professor Peter Townsend a booklet entitled, "We can afford the Welfare State". The three principles that she spells out are correct. First she says:
If we want to encourage people to move from welfare to work, we must reduce the area of means-testing, not extend it.
The right hon. Member for Birkenhead understood that, Lady Castle does and I certainly do. It is disappointing that the Government are going down the means-testing road.
Secondly, the booklet states:
We must resurrect the state basic pension as the foundation of security in old age for everyone.
I agree. Thirdly, it states:
It should be compulsory for everyone to contribute an adequate second pension.
I agree with that, too.
The Government have gone for the opposite route and run for cover by resorting to means-testing. That is the coward's way out and is unfair. It gives benefit to those in the greatest need, but where does it leave those who have made substantial sacrifices to provide for themselves? It erodes incentive and is socially corrosive. It is also very expensive. A universal benefit costs 2.5 per cent. of the total cost to administer but a means-tested one costs about 7 per cent.
In response to parliamentary questions, I have elicited the fact that heating allowances cost 10 per cent. of their total cost to administer. Those are very large amounts that result in substantial bureaucracy. The basic state pension can be administered for 45p a week while income support costs £5.45 a week. Those differences are so enormous that they must be taken into account with the argument of fairness.
What have the Government done so far on pensions? They have achieved one major act—the abolition of advance corporation tax relief for pension funds. That will reduce the amount available to pension funds by £3.9 billion this year and £5.4 billion next year. As an article in The Economist said on 6 December 1997,
A Government keener on redistributive clobbering of the middle classes without breaking its pledge not to raise income tax rates might have dreamed up something exactly like this.
It has caused damage to pension funds and those who benefit from them.
The way that it works through means that Kensington and Chelsea has estimated that the changes to advance corporation tax provision mean that it will have to find a further £1 million a year, the equivalent of £12 on the average council tax bill for bands B to D. The Chancellor has cost pension funds over the next 10 years £50 billion. As has been pointed out, Robert Maxwell took only £400 million.
The Government promised legislation on pensions without specifying its content. They have promised a Green Paper. So far, their influence on pensions has been entirely malign and damaging. I urge the Government to do their duty to pensioners, and I urge present and future pensioners to wake up to what the Government are doing to them.

Mr. Jim Cunningham: To hear the hon. Member for Gosport (Mr. Viggers) talk, one would not think that a Tory Government had plundered pension funds and, in the 1980s, encouraged people to go into private pension schemes. He seems to forget that the Labour Government have reduced value added tax to help pensioners, whereas the previous Government increased VAT, thereby punishing pensioners and one-parent families. I am sure that he is well aware that the Labour Government have been considering not only pensions, and will make proposals in that respect at some time in the future, but have at least tried to do something for pensioners in the meantime.
Many pensioners find it difficult to afford their winter fuel bills, so the Government have reduced VAT on fuel and made winter payments to pensioners to help them. I remember that, when we sat on the Opposition Benches, time after time at about this time of year, many of my hon. Friends raised the question of winter chill payments. Year after year, the then Conservative Government turned down my hon. Friends' requests.
I welcome the fact that the Government have put in £250 million to help the national health service deal with winter problems. That, too, will help pensioners, as it is the elderly population in particular that suffers from the general increase in illness this time of year. Despite all the doom and gloom that we have been hearing, I welcome the £40 billion that the Government are to put into health and education over a three-year period.
The Government are doing that despite the economic position that we inherited from the previous Government. The economic measures outlined by my right hon. Friend the Chancellor will deal with long-term instabilities in the British economy, while allowing us to steer a stable course through the difficult times that we are experiencing. We are addressing the long-term economic problems that we inherited from the previous Government. I remind Opposition Members that we inherited a 20 per cent. productivity gap between the UK and France and Germany, and one of 40 per cent. between the UK and the United States of America.
Before Opposition Members rush to the barricades, I should say that I am not criticising the workers. Let me make it clear that I am not talking about the average factory worker; I am talking about low levels of investment, which mean that, no matter how hard an individual works, the lack of adequate machinery, tools and technology lowers his productivity. When we look further into the previous Government's record, we find that, when they left office, one in five households had no one working, up from one in 10 in 1979 when the Labour Government left office. We also find lower levels of basic skills in literacy and numeracy than those of other major economies.
No one would deny that we are experiencing a downturn in the world economy. The problem in 1979 was that, when the downturn occurred, the Tories refused to recognise it, preferring to blame the previous Labour Government, just as they blame the current Labour Government now. United Kingdom exports to Indonesia and Malaysia have fallen by 50 per cent.; to South Korea by 55 per cent.; and to Thailand and Philippines by 60 per cent. The crisis affects the whole world, but, to listen to Opposition Members, one would think that it started in May 1997, when the Labour Government took office.
To set the international context, the International Monetary Fund has revised its forecasts for world growth downward, from 4 to 2.5 per cent. That could fall further as the economic situation changes. World trade growth is set to fall by two thirds. Given those problems, we welcome the Government's determination to get things right and address the weaknesses in our system, which was so neglected by the previous Government.
We welcome the new monetary framework for monetary policy, with the Monetary Policy Committee setting interest rates to reach Government targets free from political control. Also welcome are the long-term targets for interest rates, which bring stability to economic planning. Although interest rates have risen, at 6.75 per cent. they are at their lowest for 30 years, and inflation is hitting its 2.5 per cent. target. I remember when, under the Tories, the public sector borrowing requirement grew to £400 billion. They managed by slashing public spending and getting the receipts from privatisation.
The public understand the need for fiscal tightening equal to 3.5 per cent. of gross domestic product over the years 1996–97 to 1999–2000. They also understand why a reduction in borrowing—by £20 billion last year—and tight control over spending are needed to ensure that spending grows at a slower rate during the lifetime of this Parliament. In less than two years, we have achieved a balanced budget, which is something that the Tories did not do in 18 years.
Although I acknowledge manufacturers' short-term concerns, which are of particular concern to me, I welcome the Government's long-term view and determination to avoid boom and bust, which can affect and erode our industrial base. Instability could and would have been worse had the Government not taken the decisions that they took. As manufacturers have pointed out, the recession can be put down to the downturn in the global economy.
Despite all that, the number of jobs continues to grow: 400,000 new jobs have been created since the election; 250,000 people leave the claimant count each month; and 200,000 new vacancies are notified to job centres each month. In addition, the Government have set up rapid reduction units to deal with redundancies and provide localised help where job losses have occurred. They will be welcome in many parts of the country, providing temporary job centres and job advisers, fast-track help with benefits claims, immediate eligibility for training and travel costs for interviews. That demonstrates the benefit of having a Government with a progressive agenda, as opposed to a reactionary Conservative one, with Ministers preaching from on high about problems that they have never had to experience.
Another issue on which the Tories failed was youth unemployment, so I am delighted that the Labour Government have decided to tackle long-term, youth and single-parent unemployment head on. There are 125,000 people on the new deal, with 23,000 already having found work. In addition, the number of lone parents on benefits is falling and many young people have been given hope. We are helping the most vulnerable instead of throwing them to the wolves of uncertainty and helplessness. That will also play a part in tackling crime and disorder.
The wider reforms to the tax and benefits system announced in the Queen's Speech will be well received in many parts of the country. The reduction in national insurance, the new working families tax credit and the minimum wage will help those in greatest need. Although the economic problems that we face are international, the Government have done much to stabilise our economy while, at the same time, protecting the most vulnerable.

Mr. William Thompson: We have listened to many speeches tonight, some from former Ministers and hon. Members who have Treasury experience and many from those who are economics experts. If one speaker has argued one case, the next has argued the opposite—that is certainly true of the speeches referring to the single currency and economic and monetary union.
I am a Euro-sceptic. I remember our going into the Common Market, as it then was. We were told that every member state had a veto and that, if one member state disagreed with a policy, nothing would happen. Of course, after we had entered, if we disagreed we were told that we were not good partners. After some time, changes were made and majority or weighted voting was introduced. Over the years, we have seen the effect of that in the issuing of a large number of directives, many of which are neither prudent nor necessary, but over which we have had little or no control.
We have now moved towards political union. There is no doubt that many in the European Union are looking forward to political union, and the single currency is the first necessary step towards that union. If one controls the money and the finances, one has, in effect, political union. Those who are enthusiastic about political union at least now acknowledge that public opinion does not favour it. In fact, we have been told—even tonight—that there is no guarantee that political union will work. I think that it would be dangerous to enter an arrangement that has no guarantee of success without some fallback position, or even an idea of what we will do if that arrangement fails. I believe that there are many dangers inherent in the new single currency.
I have no doubt that the Government intend, sooner or later, to take us into economic and monetary union and the single currency. Efforts are being made to prepare us for entry, and no doubt the Government will seek to change public opinion in the referendum that decides our course. When preparations for entry are made, we will be told that we have gone too far and cannot turn back. I believe that the Government's policies are geared to that end. That is dangerous as it will weaken our means of determining our own policies.
I refer hon. Members to the events of the past two years and to our experiences of the beef crisis. When we consider how our European colleagues have acted, we can have no confidence that we would have much say over our affairs in the context of European political union. This Parliament would eventually become powerless.
Northern Ireland benefits greatly from being part of the United Kingdom. Our economy benefits particularly from subventions of about £3 billion or £4 billion a year. We acknowledge and appreciate that advantage. We live beside the Irish Republic, which wishes eventually to take us over. There have been many arguments in the past few months about agreements and the future of Northern Ireland, but little has been said about how we benefit from being part of the United Kingdom. We need to discuss that subject, which must be at the forefront of debates in the days and months ahead. Those who advocate a united Ireland must tell us where they will get the money to finance it.
The Northern Ireland economy is very dependent on agriculture. Some 60,000 people are employed in the agri-food industry, which represents 25 per cent. of our manufacturing base. We welcomed the early lifting of the beef ban, especially in relation to the date-based scheme. We hope that other measures will be taken soon so that more animals and more beef may be exported and our economy will no longer be affected by that great crisis that has hindered us in the past few years.

Ms Diane Abbott: I am grateful for the opportunity to speak in this debate on the Queen's Speech. I wish to touch upon the effects that the economic policy outlined in the Queen's Speech will have on the poorest. Hon. Members will know that I represent in Hackney, North and Stoke Newington one of the poorest constituencies in the country, which has one of the highest levels of unemployment in the south-east. I shall examine the Government's economic policy in the light of a very important report about inequalities in health that was published last week. The inquiry was chaired by Sir Donald Acheson.
Earlier this evening, we heard the Chief Secretary advance what has become the Government's mantra: the best route out of poverty is work. Like many of the Government's mantras, that is a truism—the best route out of poverty is work. However, the Government must address, because they have yet to do so with sufficient clarity, what they will do for those sections of society who, with the best will in the world, cannot enter or re-enter the labour market. Sir Donald Acheson put it clearly in his report. He said:
For the least well-off members of society, it is the benefit system which is the principal determinant of living standards.
When I tried to put to the Chief Secretary Sir Donald Acheson's proposition that certain basic benefits must increase, he said that the report was written before the Government's Budget and our wonderful, progressive child benefit measures. That is quite wrong. Page 34 of the report discusses the Government's Budget measures in full. In the context of those measures, the report says that benefits must increase for the poorest groups. The report states:
We believe it is important that over time benefits and pensions levels are set at a level sufficient to pay for items and services necessary for health and for participation in society.
Acheson singles out two of the very poorest groups: pensioners and women with very young children.
The Labour party once had a policy of restoring the link between pensions and earnings. It was a sad day when that policy was dropped. Means-tested benefits—which is what the Treasury Bench is offering instead—are not a viable alternative for pensioners, in particular. More than 1 million pensioners fail to claim the means-tested benefits to which they are entitled. More than one in four pensioners who are eligible to claim extra means-tested benefits do not do so. It is not because they are silly or do not understand, it is because they are from a generation that finds claiming such benefits degrading, difficult and humiliating.
The only way to raise standards of living for the poorest pensioners in communities such as Hackney is to increase the level of the basic pension. As for encouraging people of all generations to put more money into the private pensions industry, before the Government press people to secure objectives that were once secured by the welfare state—whether it is security in unemployment, health insurance or private pensions—they must look to regulating the financial services industry. The private pensions mis-selling scandals of the 1980s revealed the structural problems in the financial services area, with commission-driven salesmen and a lack of transparency.
I come now to mothers with young children. The Government seem to be saying to mothers with pre-school-age children that, if they want to raise their standard of living and rise out of poverty, they must go to work. I am a single mother. I was back here voting and playing my part in the work of the House when my son was eight days old. It is precisely because I am a single mother and I know how hard it is to leave a small baby that I would not insist that mothers with children under school age should have to go out to work to secure a decent standard of living. At present, they do not have to make themselves eligible to work, but the trend of Government rhetoric and thinking on that matter worries me.
Despite the many good things that are being done in the name of the working families tax credit—there was a very interesting speech about that earlier—the

Government must address the fact that there are people, such as pensioners and women with young children, who will not lift themselves out of poverty by going into the workplace. We need to secure at least for those groups a decent standard of living through the benefit system.
The Government's professed goals on raising standards of living for the poor and lifting people out of poverty are admirable, but none of the measures in the Queen's Speech, including the working families tax credit and the on-going new deal programme, can be effective in the absence of growth. Those who talk about prospects for growth tend to be shouted down by Labour Members and accused of talking down the economy. It is not a question of talk; it is a question of figures. We do not need to look into a crystal ball—we need only to read the book.
Manufacturing sectors are in recession or are about to go into recession. Over time, the sectors that have a problem with the over-valued pound and interest rates will take the entire economy to the bottom of the recessionary cycle. In a recession, it is no good saying that work is the route out of poverty or talking about the new deal.
My next point relates to Europe. I am not hostile to Europe and I deplore the scarcely veiled xenophobia in the tabloid press, but it is important that we begin to have an honest debate about Europe. There may well be a political case for greater European integration and, in my son's lifetime, there may well be something approaching a federal Europe, but I deplore the dishonest debate on Europe in British politics.
Anybody who pretends that we can proceed towards monetary convergence and integration without fiscal convergence and integration following as night follows day is fooling the British public. There may be a political case for that level of economic integration and for moving towards a federal Europe, but it is wrong to pretend to the British public that there can be monetary convergence while different economies in the European Union have free-standing fiscal policies. That cannot happen. The sooner we have a more transparent and honest debate about what the move towards economic and monetary union means for the totality of economic policy, the better that will be for politics and the good name of this House.
There is much to support in the Queen's Speech, but my concern remains what it has been for the 10 years in which I have been in the House—how will the measures of the Government of the day help my constituents in Hackney? I am concerned about the lack of focus on the importance of raising basic benefits for pensioners and the poorest people.
I am also concerned about monetary policy. It is driven by a great man—Eddie George—but he should never have been let loose untrammelled on monetary policy. I am concerned about the deflationary tendency of monetary policy and prospects for growth. I am concerned about the lack of honesty about the big issue facing us at the end of the millennium—what economic and monetary union means and the price that ordinary people such as my constituents might have to pay if we go into EMU without sufficient thought and understanding.

Mr. David Ruffley: I am grateful for the chance to contribute to a debate on the Gracious Speech, which has at its core a commitment to delivering economic stability.
One of the central elements of economic stability is the Treasury's ability to set an independent tax policy. Therefore, I was particularly interested to hear the Chief Secretary say earlier that he would be tough about using the veto to prevent any harmonised tax proposals being imposed on this country. We have heard warm words from Ministers over the past couple of days in the face of a backlash from the press and public about the threat to the country's economic management arising from remarks by EU Finance Ministers and Commission officials.
Conservative Members are staggered by Ministers' complacency. They said that such comments were just a Euro-sceptic invention and that, somehow, the people on the continent who were making them were of little significance and of no consequence.
We know that there is a threat of tax harmonisation from Brussels because the Prime Minister says one thing in No. 10 briefings to the press, but Treasury Ministers say another. In the Financial Times this week, the Prime Minister said that he wanted all proposals on tax harmonisation to be considered pragmatically. He is worried that we may be left out of the game as EU partners harmonise more quickly in a headlong rush to make headway in launching the European single currency.
A gentleman called Mario Monti is the EU Commissioner for the single market. I should like to expose the "Full Monty" of a set of proposals referred to as the draft code of conduct for business taxation, to which the Government signed up in October 1997. This draft code is very interesting because, as a result of discussions about it, instead of being in her place, the Financial Secretary is chairing a meeting at which no fewer than 85 tax breaks and reliefs will be abolished. At least 10 of them are enjoyed in this country. They include tax breaks for the British film industry, shipbuilding, small and medium enterprises in Northern Ireland and much else besides.
The Financial Secretary is bargaining away tax breaks, which were certainly enjoyed in this country until the election, because the Government are harmonising tax reliefs. If that is not creeping harmonisation, we on the Opposition Benches do not know what is. Creeping harmonisation is a threat. The press knows it, the public know it and the Opposition will never let Ministers forget it—up to the next election and beyond.

Ms Sally Keeble: I am grateful to be called in this debate.
In their amendment, the Opposition have set out to criticised the Government for failing to take steps to protect jobs and help businesses. In doing so, they are exercising selective amnesia. They cannot stand only on their six-month record in the run-up to the election. They must stand on the record of their entire 18 years in government, which was not a golden era for the British economy.
In the 1980s, an enormous recession forced the collapse of manufacturing. I saw a steel foundry in Birmingham stripped down and sent off to the third world, and virtually the entire work force of the car industry put on the dole. Unemployment rose so fast that the welfare state

collapsed and all Department of Health and Social Security offices shut. It was not the then Tory Government who saved jobs or helped businesses, but a Labour city council, which met the challenge of regenerating the local economy.
In the 1990s, recession in inner London, we saw unemployment rise to 35, 40 and 50 per cent. in key areas, and the creation of a divide between rich and poor that was a disgrace to this city. Measures on unemployment introduced by the Tory Government were aimed at producing headline figures and did not deal with long-term structural problems in inner cities. That is why the new deal is so right.
The new deal targets attention—money and personnel—at the real problems: the long-term unemployed and young people who grew up as a second generation of unemployed in what we call the Tories' golden legacy. Any such legacy went to the selected few and not the many, which is why the economic measures in the Queen's Speech are so important. In conjunction with the steps that the Government have already taken, they will ensure not just stable growth but that the benefits of that growth will be extended to the many.
Our policies for education will give people the skills that they need to participate in the economy; the working families tax credit will ensure that work pays; and the child care tax credit will give many women the first chance to go out to work. In particular, I emphasise the reforms that the Government are making to financial services regulation, which will ensure that more people are empowered to benefit from the economy.
Mrs. Thatcher wanted more people to invest, but she failed to provide the security that people needed to do so with confidence. The Government are encouraging investment by the public—for example, by extending employee share ownership and introducing individual savings accounts—and providing more security by, among other things, passing the financial services and markets Bill.
Let me consider just two forthcoming measures. I am sure that the ability to take civil proceedings in cases of market abuse will help to restore confidence in the probity of the City, which, in turn, can only help to encourage people to invest. A second measure to place the various forms of financial regulation under a single umbrella will benefit the interests of the public by making it easier for them to obtain redress when things go wrong.
The biggest financial commitment that most of my constituents will ever make is the purchase of a home. In the dying days—literally—of the previous Government, I toured housing estates in my constituency to study the problem of repossession. House after house was boarded up—another sad testament to the so-called golden legacy of Tory Britain. By unifying and simplifying regulation, and by providing more safeguards for that most basic of investments, the Government will protect people's long-term financial security, and the long-term future of the financial services industry.
The drive behind the Queen's Speech is to build a sound economy; ultimately, that is what my constituents will judge the Government by. Measures set out in this year's Queen's Speech will ensure that those benefits are extended to the majority of people in our communities. I commend it to the House.

Mr. Christopher Fraser: Tonight's debate has been rehearsed many times and we have discussed the economy many times, but this time the debate is vital, because our country's future depends on getting the economy right. The debate also affords us the opportunity to examine the Gracious Speech, and to anticipate the effects of the Government's proposals for our economy for the next year—so it is very timely.
It is important to pose a series of questions relating to the Government's handling of the economy, and specifically their guiding principles of economic management. Does the Government's approach—and the proposals in the Queen's Speech—make it easier for firms to produce goods at lower cost? Does it make it easier for companies to invest? Does it reduce the tax burden on individuals and companies? Does it make it easier and cheaper for firms to take on staff? Does it make it easier for individuals to invest in their own future?
I fear that all those questions must be answered in the negative. The raid on pension funds; the increased regulation of financial services; the flunked welfare reforms; the increased trade union recognition; the extension of maternity leave to 18 weeks; and the introduction of the working families tax credit add up to a package of damage which can only increase costs and regulation and destroy the competitiveness of the British economy—the economy that the previous Government fought so hard to maintain. All that before we even address the minimum wage and the social chapter.
I believe that most members of the Treasury team have never run a business—except, of course, the Paymaster General; at times, he must wish that he had run several fewer businesses. I have run a business: I know what it is like to run one in hard times. It has been difficult on occasions—difficult for small and medium businesses, which must now face the current economic climate. Those businesses were the backbone of the country's economic success in the 1980s.
The Government must ensure that small business is at the forefront of their economic policy. Let me tell Labour Members that the smaller companies, which represent the bulk of employment and economic activity, are voicing grave concern. As we know, business confidence is at its lowest for 18 years. People and businesses are extremely nervous—in my judgment, rightly so—because times have been tough for them. The international economy has, of course, been a factor, but they have suffered from high interest rates and the high pound and they have suffered in many other ways, as a result of the Government's so-called social legislation.
The Government tell us that the minimum wage and the social chapter are good for those who are in work. Perhaps that is right, but not if the effect of the Government's measures is to pile on costs, make the company uncompetitive, lead to closure and put workers out of a job. The minimum wage and the social chapter are useless for those who are out of work and for those who are seeking to enter employment. The policies that they need are ones that help companies grow through efficiency and by exporting successfully through deregulation and low tax. In short, these are policies that would build on the success that the economy was enjoying before Labour Members got their hands on the levers of power.
Labour has given away one of the levers—the control of interest rates—to the Bank of England. We hear this every Wednesday when the Prime Minister comes here to answer questions. The right hon. Gentleman tells the House each week that the Opposition are against independence for the Bank of England. Each week, he invites my right hon. Friend the Leader of the Opposition to answer his questions. One wonders sometimes whether the Prime Minister would prefer to be on the Opposition Benches asking questions rather than having to suffer the inconvenience of answering questions.
The point of Bank independence is not whether the Opposition are in favour or against it, but that the Government have created a mess of their own making. It was their decision to give independence to the Bank, as it was their decision to set the Bank a narrow remit. It is their choice to pack the Monetary Policy Committee with people with no real experience of the sharp end of business. A serious consequence of their actions is the current state of the economy. It is a cop-out for the Government continually to question the Conservative position on this issue. It is the Government who have to answer for their actions.
To compound the situation, the Chancellor of the Exchequer signed up to the "The New European Way", which commits the Government to the harmonisation of European Union tax policies. By doing so, the right hon. Gentleman has thrown in his hat with the new German Government, who are pledged to take forward economic harmonisation during their European presidency. Having signed that document, how can the Chancellor of the Exchequer declare himself opposed to the harmonisation that it advocates? It does not wash to declare a common system of value added tax and a withholding tax on cross-border savings as being no more than scare stories invented by the Opposition.
We are told that the Chancellor of the Exchequer will use the veto to protect British interests. As has already been said, however, the Financial Secretary to the Treasury chairs a working group of EU Finance Ministers which is drawing up plans to end so-called powerful tax competition among member states. How are we to believe the Chancellor of the Exchequer's protestations when the interim report is said to include more than 80 measures to address what has been described as unfair tax competition, and when some of which, if reports are true, are measures introduced by the Government? The Chancellor cannot have it both ways. He must now make very clear to his colleagues in Europe the promises that he has made to the British electorate that
 tax harmonisation is not the way forward for Europe. Britain's tax decisions will be made in Britain.
The Chancellor of the Exchequer must make clear how he sees the future for personal taxes and for corporate and business taxes. After all, the European tax Commissioner believes that the United Kingdom is "fully on board."
The more economically astute Government Members are beginning to realise that soundbites and spin do not run an economy. A task force here, consultation there and a denial when expedient are no substitute for a clear tax policy and a drive for competitiveness in the British economy. Warm words are little comfort against a background of job losses and fear for the future. For so many years, when in opposition, the Chancellor of the


Exchequer predicted recessions, downturns and busts. The right hon. Gentleman may now be about to fulfil his predictions through his own actions.
I have referred before to the fact that my constituency is truly the enterprise centre of Dorset. We have many businesses and a high level of employment. However, 18 months into the Labour Government, the mood of optimism in Dorset is giving way to a degree of concern and pessimism. Businesses in my constituency do not see coherence or substance in the Government's economic policies. They do not believe that the Government have enough understanding of business to create an environment that is friendly to it. The Government are leading the economy into a dark alley. The British people will pay a heavy price for the Government's folly. In turn, they will ensure that the Government pay a price for what they are doing to an economy which was, such a short time ago, the enterprise centre of Europe.

Sir George Young: It is my privilege, for the second year in succession, to wind up for the Opposition in the debate on the Queen's Speech. More than 120 hon. Members have taken part in the debate, including a Prime Minister, a former Prime Minister, a former Deputy Prime Minister, a former Chancellor and a large number of right hon. and hon. Members.
It seems a long time since the Queen's Speech left Bassetlaw and Edinburgh, Pentlands a week ago, but it got off to a cracking pace thanks to my right hon. Friend the Leader of the Opposition, whose parliamentary performances were rightly recognised by the judges of The Spectator parliamentarian of the year award the following day. Those of us at the ceremony witnessed the pride with which my right hon. Friend accepted that award, and the pleasure that it gave the Deputy Prime Minister to present it to him.
To be impartial, I shall congratulate the Leader of the House on her recent Variety performance in aid of charity, which attracted some colourful, if mixed, comments. One newspaper reporter, a braver man than I am, described her voice as having the potential to "stun charging bullocks" and "keep mosquitoes at bay".
I remind the right hon. Lady of some words that she used not on that occasion, but five years ago when she was shadow Leader of the House, speaking as I am now at the end of the debate on the Address. She said:
The Government's programme, as embodied in the Queen's Speech, was rightly described by my right hon. and learned Friend the Leader of the Opposition as thin. Tonight, after six days of debate, we know clearly why… The purpose of this Queen's Speech has been … to fob us off with rhetoric, sound bites and scapegoats."—[Official Report, 25 November 1993; Vol. 233, c. 662.]
Those words seem more appropriate tonight than when the right hon. Lady originally spoke them.
Our debate this afternoon was opened by the Chief Secretary. He took some risks by making an assertion in his speech that he was unable to substantiate. We expect him to produce chapter and verse for his assertion that my right hon. Friend the Member for Horsham (Mr. Maude) has opposed the £40 billion on health and education. If he cannot produce that substantiation, I know that, as an hon. Member, he would want to withdraw his assertion.
The Chief Secretary sounded more and more like Baroness Thatcher as he outlined with relish how he would use the veto if certain European policies developed in a certain direction. However, he did not answer all the questions posed by my right hon. Friend. Having listened to the Chancellor of the Exchequer in a rather defensive performance on the "Today" programme this morning, and having listened to the Chief Secretary this afternoon, I am not wholly reassured about the Government's policies on tax harmonisation. It is a subject to which we shall want to return on many future occasions.
The hon. Member for Gordon (Mr. Bruce) made some kind remarks about the Opposition's amendment. I hope that that means that the Liberal Democrats will vote for it. I am sorry to see hon. Members shaking their head, as the hon. Gentleman said that the Opposition amendment was spot on. It is disappointing that the Liberal Democrats will not support us in the Lobby. The hon. Member for Gordon accused the Government of drift on Europe, implying rightly that, behind the facade, there are tensions, pulling the Government in opposite directions and inducing paralysis.
The next speech in the debate, that of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), brought to light some of those tensions on the Government Benches. In a brave speech that was somewhat off-message, he made it clear that he believed that we should be in the first wave when it comes to joining the euro. He referred to some of the risks that would confront the City of London if certain measures went ahead, and he took the House with him on that. He made some eminently sensible comments about the composition of the Monetary Policy Committee.
My hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) said that we would hold the Government to the commitments that they gave today, and we will. He pointed out that we pay a price in terms of growth and employment if we delegate to the Bank an inflation target, with no other economic targets to go with it.
The hon. Member for North Durham (Mr. Radice) made a good Keynesian speech, gently chiding the Government for a lack of clarity on policy on EMU. He made a brave attack on The Sun—the sort of attack that an hon. Member can make only if he has a blameless personal life.
My hon. Friend the Member for Wycombe (Sir R. Whitney) reasserted that we left the economy in good shape. He rightly pointed out that the reduction of £20 billion in the public sector borrowing requirement was due to policies that the Government inherited, rather than policies that they implemented. He queried, as did a number of hon. Members, some of the more optimistic growth forecasts from the Treasury Benches.
I enjoyed the speech of the right hon. Member for Llanelli (Mr. Davies). It was a thoughtful speech that put the economy in a broader context—not just a European, but an international context. He explained economics in words that a child could understand, and his speech should be widely read.
From basic economics to advanced psychology: my right hon. Friend the Member for Fylde (Mr. Jack) was right to point out that climate, mood, confidence and the feel-good factor are important to economic success. At the moment, as he rightly pointed out, they are not


there. He also expressed the hope that the Government would maintain the momentum on streamlining the tax system, into which he invested a lot of effort.
The right hon. Member for Coatbridge and Chryston (Mr. Clarke) was one of the few speakers to focus on the less-developed countries and on the economic problems that confront them. He criticised the short-term approach, which can often harm the long-term development of those countries. He wanted to refocus globalisation to help rather than harm those countries, and he spoke with feeling and knowledge on an important issue.
My hon. Friend the Member for Esher and Walton (Mr. Taylor) described how he came face to face with President Castro—face to beard would be a better description of that encounter. My hon. Friend gave a cool assessment of the issues surrounding the launch of the euro and the terms of trade on the debate about the euro. He posed a number of questions, to which I hope that, at some point, the Government will be good enough to reply.
The hon. Member for Bolton, West (Ms Kelly) focused on the international system and made some perceptive comments about the need for reform of the international monetary system to take account of today's markets. She carried the House with her on that.
My hon. Friend the Member for Orpington (Mr. Horam) criticised the lack of vision in the Queen's Speech and outlined some retrograde steps that have been portrayed as forward looking.
The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) lifted his eyes beyond the horizon of the arts world, which has preoccupied him for so long, and made a thoughtful contribution—based on a realistic assessment of the economy—focusing on electronic trading and its potential. He rightly urged the House not to forget the importance of manufacturing industry.
The hon. Member for Northavon (Mr. Webb) gave some warnings about the working families tax credit. Every Member on the Treasury Bench should read what he said, reinforcing points made by my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith). The criticisms that he made about the working families tax credit demand a reply.
The hon. Member for East Carmarthen and Dinefwr (Mr. Williams) welcomed the reflationary impact of the expenditure on health and education, but in so doing he slightly undermined the case that the Government have made by implying that reflation will be necessary in three years, when the Chancellor has been predicting some robust growth.
My hon. Friend the Member for Gosport (Mr. Viggers) described the impact of the world downturn on our economy and exports, and then spoke about the impact of the economy on pensions. He was the only hon. Member to focus specifically on pensions. He identified the Government's failure to answer a number of pension questions, after some false starts, and some possible solutions, quoting Baroness Castle as an ally.
The hon. Member for West Tyrone (Mr. Thompson) made a robust, Euro-sceptic speech. The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) picked up on the Acheson report and focused on those who cannot work. She invited the Government to come up with a more credible strategy for those for whom work is not an option. It was one of the most supportive speeches that

I have heard the hon. Lady make in the House. For that reason, it was a slight disappointment to have to listen to it.
My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) talked about tax harmonisation and rightly pointed out that a number of issues have not been resolved. Even as the debate is taking place, there are threats to the United Kingdom film and shipbuilding industries, to which we shall want to return.
I commend the hon. Member for Northampton, North (Ms Keeble) for her patience in sitting all the way through the debate. I listened to what she said about the inner city, drawing on her time as leader of Southwark council. I remember working with her on regenerating some of the difficult estates in Peckham and Camberwell, and I hope that she exempted from her critical remarks the work of the Department of the Environment in the mid-1990s.
My hon. Friend the Member for Mid-Dorset and North Poole (Mr. Fraser) focused on the supply side of the economy and rightly reminded us of the need to make sure that our industry remains competitive by looking at supply side measures.
Re-reading the Queen's Speech last night, and looking out for rhetoric and soundbites, I noticed that the word "modernise" appeared 12 times—10 times in the first two pages. It appeared 11 times in a much shorter article on the Queen's Speech written by the Prime Minister for this week's issue of The House Magazine.
That has been the spin—the Chief Secretary referred to that in his opening remarks—but what does it mean? When one considers the measures in the Queen's Speech, I do not think that it means a lot. Forcing GPs into a new relationship about which many of them are unhappy is, apparently, to
continue to build a modem National Health Service".
Taking cash away from some potential claimants on modest incomes is "to modernise legal aid". Saving £500 million from women whose husbands die young is "modernising benefits for widows". Removing incentives from the town hall to improve efficiency and quality of service is
to modernise local government in England and Wales".
Even this Government, however, are unable to describe their proposals for London, involving the appointment of a mayor—a post that dates back several hundred years—as "modernising", using instead the word "new". That shows the absurdity of trying to brand a speech or programme by applying one adjective to it: the verbal elastic simply snaps. Once we take off the label and look at the contents, we see that the Queen's Speech lacks coherence, shape and momentum—a point well made in The Times yesterday by Peter Riddell.
That leads me to my second point. Spending two or three days in my constituency in the middle of a six-day debate on the Queen's Speech demonstrated to me the difference between two worlds: the modernised world of the Queen's Speech, elegantly spun and crafted by wordsmiths—although, sadly, someone overlooked the need to equip the Prime Minister with the decent speech to which he was entitled—and the real world in which we and our constituents lead our daily lives.
In Labour's world, local government will be more efficient and more responsive. In the real world—given tomorrow's revenue support grant statement—all that the


public in my constituency and, I suspect, elsewhere will get will be higher council taxes and more pressure on social services, aggravated by the need to make good the shortfall in pension funds caused by the raid in last year's Budget. Without a full local government Bill, the grand strategy for democratic renewal that the Deputy Prime Minister has been trumpeting will have to wait another year.
In Labour's world, on the very day of the Queen's Speech, the Deputy Prime Minister dreamt of bringing back the dawn chorus and the linnet. The Queen's Speech refers to protecting the environment, but, in the real world, the Deputy Prime Minister overrules county councils and makes them develop green-field sites that they do not want to develop. Hampshire county council's structure plan faces the threat of being overruled by the Government; in West Sussex, that has already happened.
In London—Labour's capital—the Government have promised
a range of powers to help make London a world class city".
Some of us would assert that London was a world-class city long before the people's party arrived on the scene, but, apparently, it is not yet resilient enough to be entrusted to the hon. Member for Brent, East (Mr. Livingstone). I must tell the Deputy Prime Minister that, until he implements a policy that will secure resources for London Transport, his strategy will lack credibility. We have heard some tough talk from the Government about improving rail services, but if the Deputy Prime Minister cannot make his Bills run on time, what chance has he of making the trains run on time?
In Labour's world, we are promised "strong arrangements for defence". In the real world, the defence budget has been cut—at a time of growing international uncertainty—and the Territorial Army has been savaged, in the teeth of opposition from the Defence Select Committee. In Labour's world, the wait for operations becomes shorter—if we believe Government figures—but, in the real world, my constituents must wait before even getting on to the waiting list. It has been necessary to wait 37 weeks for an out-patient appointment for treatment for varicose veins, and 31 weeks for endocrinology treatment at North Hampshire Hospitals NHS trust. I do not claim that those are life-threatening illnesses, but the figures show how misleading it is to refer to waiting times for operations when they are only part of the total waiting time.
In Labour's world, GPs will be enfranchised and put in charge of primary care groups. In the real world, doctors fear that they will be short-changed by the reforms, distracted from their professional commitments and turned into reluctant accountants and administrators.

Ms Keeble: Will the right hon. Gentleman give way?

Sir George Young: I will give way once; then I must make progress.

Ms Keeble: Will the right hon. Gentleman accept my account of what is happening in the real world in my constituency, where GPs piloted GP commissioning? That has produced, for example, emergency pelvic scanning for women, which has probably saved lives and has certainly

prevented serious conditions. Does the right hon. Gentleman accept that GP commissioning is a powerful tool?

Sir George Young: In Andover in my constituency, there was a pilot for primary care groups—a pilot for stage 4—but, having talked to GPs locally, I know that there is concern that they will not receive Government back-up for the administrative support that they need, and they will be distracted from their primary job of looking after patients.
In Labour's world of industry, the Government talk of partnership. When she was Secretary of State for Trade and Industry, the Leader of the House of Commons said that the proposals for union recognition were a new culture of partnership, but, in the real world, we have compulsion. On the economy, the subject of today's debate, the Queen's Speech talks about
high and stable levels of economic growth and employment … and greater job opportunities",
but, in the real world, Rover has announced 2,500 job losses and people are losing jobs throughout the country—one job is being lost every 10 minutes. Last Friday, 4,200 jobs went in a single day, as firms grappled with the consequences of a high pound and high interest rates. Today, it was announced that another 1,000 jobs are to be lost at Courtaulds.
In Labour's world of education, teachers will be retrained and class sizes reduced, but, in the real world, the Government's pledge to cut class sizes for five to seven-years-olds is having an adverse effect. Class sizes for seven to 11-year-olds are shooting up. Teachers' independence and flexibility is being eroded and their hands are being tied. Successful grammar schools are threatened. In time, people will form their own conclusions as to whether Labour's world corresponds to the real world.
It is usual for the Leader of the House and the shadow leader to say a word about House of Commons matters. The House will know that the Modernisation Committee has been meeting, usually twice a week, grappling with matters of reform. We will be as constructive as we can, but we need to remember that our duties to hold the Government to account, to scrutinise legislation and to represent our constituents should come first, and that some personal inconvenience may be inevitable if that job is to be done properly.
To produce a manageable programme—not least to make way for House of Lords reform—many Bills have been ditched. That proposal will weaken, rather than improve, the scrutiny of legislation and the second Chamber's independence will be reduced.
The decision to abolish the voting rights of hereditary peers is the political equivalent of some French or German emperor who is poised to conquer Europe suddenly deciding to invade Russia. It is not just a diversion from the main objective; it will prejudice its attainment. The Government will get deeper and deeper into strange territory. They will run out of food and ammunition. Winter will close in and take its toll.
I can see only one benefit in rushing to abolish the hereditary peers. It might improve the chances of this House winning the annual tug of war once the upper House loses its fit, well-nourished and virile younger peers.
To compensate for the dearth of new measures in the Queen's Speech, the Government have reannounced some old ones; we are all familiar with the Government's habit of making the same announcements again and again. I understand that they have set a new target for next year: to save scarce resources, 60 per cent. of all new announcements will use recycled money.
In this great debate, what about the Liberal Democrats? It is an interesting phenomenon that, the higher the number of Liberal Democrat Members, the lower their enthusiasm to remain an independent party. If that paradox continued to its logical conclusion and they ever became the largest party, they would immediately apply to join a smaller one.
If I were a Liberal Democrat Member, I would be worried by the latest opinion poll. It shows not only that the Liberal Democrats are losing ground to the Conservatives, but that their leader's status is improving. I invite Liberal Democrat Members to reflect on that for a moment because, if that trends continues, he may be a popular general, but he will not have any troops.
The only real opposition to the Government is the Conservative Opposition. The Liberal Democrats do not oppose the Government; they urge them to go faster, to tax more, to spend more, to regulate and to intervene more.
During the Session, we will explain to our constituents the difference between the world of the spin merchants and the real world. We will explain that the measures in the Queen's Speech do not address the problems of the real world, ignore the priorities of Britain's people and instead pursue the Labour party's narrow, sectional interests.
We shall hold the Government to account. We shall do so, first, in Parliament—an institution that the Government seek to marginalise and sideline and that we Conservatives shall continue to defend. Having won the arguments in the House, we shall carry the arguments to a wider public, and bring about the ultimate defeat of this opportunistic and unprincipled Administration.

The President of the Council and Leader of the House of Commons (Mrs. Margaret Beckett): The Gracious Speech—the second one of this Labour Administration—provides us with the opportunity of looking ahead to the coming year from the vantage point of 18 months of solid achievement. Although few could deny that achievement, many Opposition Members have tried to do so in this debate. Class sizes for five, six and seven-year-olds are coming down so sharply that we hope to fulfil our pledge on class sizes ahead of time. Hospital waiting lists have been falling monthly. Action is being taken to bring young offenders more speedily before the courts, and the new deal is in place and contributing to increased employment.

Mr. Simon Burns: Will the right hon. Lady give way?

Mrs. Beckett: No.
Over 50 pieces of legislation have been enacted, including legislation on modernisation of our constitution and the historic step of setting the first-ever national

minimum wage. That action is important on its own, but it is not on its own. It stands in the context of proposals made by my right hon. Friend the Chancellor of the Exchequer for a working families tax credit, for a disabled persons tax credit and for the largest-ever increase in child benefit.
Before the general election, our widespread consultations with the business community produced some key concerns: economic stability; ending boom and bust; and, hence, a stable and consistent approach to economic policy. Placing control of interest rates in the hands of the Bank of England—which the Opposition threaten to reverse—was only the first of more widespread measures that contribute to sound management and good government.

Mr. Ruffley: Will the right hon. Lady give way?

Mrs. Beckett: If the hon. Gentleman will forgive me, I have much to say and not much time. I shall give way later, if I can.
Using the public spending programme that we inherited gave us time to assess across government how public funds can best be used to pursue the people's priorities. Our decision was massively to increase investment in education and in health—£40 billion in total in those services over the next three years. That decision, our investment in transport and our decision to make the largest-ever investment in science policy rightly commanded both headlines and public attention.
As significant in the long term will be our action on reforming the management of public spending, setting a firm programme over three years so that Departments and agencies have more freedom sensibly to manage their money in those years, and our decision to ensure that investment of public money is matched by a commitment to both modernisation and reform. Our most difficult, but most crucial, decision was to establish a process whereby we judge the worth of the investment of public money on the outcome—on performance, and on what is delivered—rather than on the amount of money provided initially. All those actions are fundamental and long-overdue changes to the way in which we approach the management of public funds and the uses to which they are put.
The investment itself is made possible by sound economic management. Repayment last year of £20 billion of debt that we inherited from the Conservative Government, the firm grip that we have taken on inflation and—despite recent difficulties around the world—continued employment growth are all clear signs of a Government who know where they are going and how they intend to get there.

Mr. Ruffley: Will the right hon. Lady explain why the European Commission is predicting that, next year, UK economic growth will put us at the bottom of the European Union growth league?

Mrs. Beckett: The average of forecasts of the economy—of 44 independent forecasters—ties in with the forecasts made by my right hon. Friend the Chancellor.

Mr. Ruffley: That does not answer the question.

Mrs. Beckett: Yes, it does. I assume that the hon. Gentleman, who presumes to be economically literate,


realises that we are at a different stage in the economic cycle from the rest of Europe, as we were under the previous Government.

Mr. Bercow: Will the right hon. Lady give way?

Mrs. Beckett: No; I must get on.
As we lay the basis for economic prosperity, we take action to ensure that that prosperity and the opportunity that it brings are fairly shared—not because doing so is right in itself, although it is, but because it is in the interests of all. Britain can no longer afford for our people to be ill-trained and under-equipped. We can no longer afford a damaging and deteriorating transport infrastructure. We can no longer afford merely to wring our hands over the numbers of discoveries made in Britain but turned to economic advantage across the world by the economies of our competitors. To this Government has fallen the herculean task of changing those, Britain's historic weaknesses. Just as our management of the economy and public finances sets a long-term context in this Parliament and beyond, so too does our approach to legislation.
The proposals for constitutional reform in last year's and this year's Queen's Speech create a new democratic settlement in the United Kingdom. In our approach to health service reform, we seek a new and enduring direction for the delivery of health care, just as we seek to create a fresh balance—a fairer balance—that will contribute to improving Britain's competitiveness by our proposals for fairness in the workplace. In all those areas, we seek a fresh settlement which we hope will endure for years.
Last year, my right hon. Friend the Parliamentary Secretary to the Treasury, my predecessor in this post, brought to the House proposals to improve the way in which we work. I hope to take that process forward.
This coming year, we will publish more Bills in draft. We will submit more of those draft Bills to various methods of pre-legislative scrutiny. Pension sharing on divorce has already been examined by the Social Security Committee. Both Houses of Parliament will be asked to appoint a joint committee to examine the financial services and markets Bill and we hope that, next year, the Administration Committee will have an opportunity to report on our draft freedom of information Bill. The asylum and immigration Bill will go to a Special Standing Committee, allowing the taking of evidence.
From the start of this Session, every Government Bill will be accompanied by a statement as to whether it is compatible with the European convention on human rights and all Bills will be accompanied by new-style and better explanatory notes.
The House has also recently agreed to improve the scrutiny of European Union legislation and we will certainly seek agreement to bring into effect another procedure recently agreed—to start one or two Bills in the Commons late this Session and carry them over into the third Session to allow proper scrutiny.

Mr. Bercow: I am grateful to the Leader of the House for giving way. In disowning tax harmonisation this afternoon, should not the Chief Secretary also have

disowned its euphemism, tax co-ordination, which, regrettably, has been enthusiastically supported by the German Finance Minister, Oskar Lafontaine?

Mrs. Beckett: As Mr. Lafontaine said this evening, he was speaking personally. He certainly was not speaking for the Government, as my right hon. Friend the Chief Secretary made crystal clear earlier. Mr. Lafontaine did not even claim to speak for the German Government, let alone ours.
My right hon. Friend the Prime Minister set the scene for the debates on the Queen's Speech, drawing on our commitment to modernise and reform to meet the priorities that we set ourselves and the people endorsed in the last general election. He set out how this year's Queen's Speech takes forward that programme. He drew attention to the strides already made on our first priority—education—the four pieces of legislation passed last Session, the additional £19 billion of expenditure allocated to our schools over the next three years and the series of programmes that those resources make possible that will allow us to pursue our aim that every child in every school in every part of the country will get a decent education. We shall continue to make proposals such as the Green Paper which will be shortly published on the teaching profession—a further building block in providing an improved education service.
Alongside our programme to improve standards in education is our drive to develop and strengthen our health service, not merely to care for those who fall sick, but to tackle the problems that create or foster ill health. We will invest in our health service some £21 billion over the next three years, with the biggest hospital-building programme in the history of the health service—certainly one far larger than the Liberal Democrats promised at the general election or since. Most important of all, and key to the Queen's Speech, we will be able to ensure that the money that is made available goes into patient care rather than bureaucracy.
I was astonished to hear the Leader of the Opposition say that our NHS Bill would increase bureaucracy. No British Government have ever weighed down the health service with bureaucracy as the Conservatives did. We will reverse that trend.
Cross-departmental working should deliver care geared to people's needs rather than to the boundaries of health or social care. [Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. There are far too many private conversations going on in the House. The House must settle down.

Mrs. Beckett: We shall promote an approach to clinical excellence and high standards of health care that builds on the best of the well-deserved reputation of our NHS.
In the week of the publication of the Acheson report, commissioned by this Government, which highlights the widening divide created by the Conservatives between the quality of life of the less-well-off and that of the wealthiest in our society, it is appropriate that we debated the health service and welfare reform on the same day. As my right hon. Friend the Secretary of State for Social Security pointed out, the anticipated rate of increase in social security spending in this Parliament is half that


of the previous Parliament. In part, that is a consequence of growing employment and the Government's policies of getting people into work, but it is also a consequence of our gradual reforms to provide work for those who can and real security for those who cannot.
Crucially, we shall make work pay. I am astonished—I suspect that it will become a source of grief to the Conservatives—that their social security spokesman and their leader have committed them to rejecting the working families tax credit and with it, presumably, the disabled persons tax credit. The single gateway to the benefit system should create a better, more meaningful service for those who need support. It is 50 years since the Beveridge proposals were drawn up—years during which patterns of work—

Mr. Jack: On a point of order, Mr. Deputy Speaker. In his response to the debate, my right hon. Friend the Member for North-West Hampshire (Sir G. Young) followed the precedents and courtesies of the House in picking up on the contributions made by individual right hon. and hon. Members. The Leader of the House has not mentioned any contribution by any right hon. or hon. Member. Is she in order?

Mr. Deputy Speaker: The debate on the Queen's Speech has gone on over many days. The right hon. Lady is allowed to answer the debate as she sees fit. She has been in perfect order. Had she been otherwise, I should have said so.

Mrs. Beckett: I recall the right hon. Gentleman's contribution. I thought that I was doing him a favour by not drawing attention to it.
It is 50 years since the Beveridge proposals were drawn up—years during which patterns of work and family life have been transformed out of recognition, yet the benefit system still assumes a single breadwinner working for the same employer for more than 40 years without sustained interruption or ill health. A fundamental reassessment of that structure is long overdue. The improvements that we have already announced are welcome.
Tough measures were introduced during the previous Session to combat crime. That process will continue with the strengthening of the youth courts and the modernisation of many of our justice procedures. Little has been said about that during the debate on the Loyal Address, because the Opposition chose, bizarrely, not to debate home affairs in general, but to concentrate all their attention on the constitutional outrage that they detect in the Government's determination to take the Conservative party at its word and abolish the hereditary principle in the House of Lords. I do not want to be unfair to the Conservative party. I recognise that the word in question was not given by this generation of politicians. Politically, if not personally—at least not in this House—it was their fathers and grandfathers who, 87 years ago, accepted on behalf of the Conservative party—[Interruption.]

Mr. Deputy Speaker: Order. I am sorry to interrupt the right hon. Lady once again, but the House must come to order and allow her to respond to the debate.

Mrs. Beckett: I suspect that the Conservative party does not want to hear anything further about reform of the House of Lords.
As I was saying, 87 years ago, Conservative Members' fathers and grandfathers politically accepted that the retention of power in a legislature dominated by hereditary peers could no longer be defended by the Conservative party.
Conservative Members gave way on the principle then, but in the 87 years since, they have not lifted a finger to advance it. They have considered with great care all the proposals put forward by other Governments, but they have never managed to find one that suits them better. That is the nub of the matter—to have the second Chamber of our legislature permanently in the hands of their party with a 3:1 majority suits them right down to the ground.
It has been evident throughout the debate—it is evident now in the behaviour of Conservative Members—that the Conservative party feels that it has the right to rule, irrespective of the will of the people. In the other place, of course, that is exactly what it does—it rules irrespective of the will of the people with a 3:1 majority over the Labour party. It would continue to have a majority in the other place even if we abolished the voting right of every hereditary peer tomorrow. That is what Conservative Members call independence—people who agree with them.
Today, the debate has focused on economic issues. I would say that we had focused on them afresh were it not for the fact that everything that Conservative Members said was boringly familiar. They pretend that the Government inherited an economy without problems and that all the problems that we do face are a result of the personal doings of the Chancellor or the Prime Minister.
That is, of course, the world in which they would prefer to live; sadly for them, it bears little relation to the world in which we actually live—a world in which they doubled public debt and ignored the dangers of increasing inflation to avoid electoral unpopularity by raising interest rates.

Mr. Maude: Where are the Chancellor and the Prime Minister?

Mrs. Beckett: The shadow Chancellor, who is heckling from the Front Bench, knows perfectly well that the Chancellor is attending an Economic and Financial Council meeting in Brussels. The shadow Chancellor rejected our offer to have this debate yesterday so that the Chancellor could be here, so I want to hear no more from him.
Since the Labour party came to power, public debt has been massively repaid and our sound programme for investment in much-needed public services has been announced. We have cut corporation taxes and done much else to strengthen the country's productive potential. Inflation is under control and long-term interest rates are at their lowest level for 35 years.
We have taken on the problems that our predecessors shirked and set the economy on the right course for the long term. That has been a consistent theme of all our work, from the Prime Minster's decision to secure a fresh settlement in Northern Ireland all the way through to the economic and social programme that we are pursuing.
There has also been a consistent pattern in the Opposition's behaviour. Sadly, it has been one of snap judgments and misjudgments. They oppose our programme for investment in health and education.
The shadow Chancellor challenged us to say when he had called that investment reckless. On Friday 24 July, the Conservative party issued a press release in which he said:
The Chancellor announced last week he is to embark on a reckless spending spree".
Those are the shadow Chancellor's words, issued by his party office.
The Conservatives have opposed the investment that we propose to make, they oppose the national minimum wage and they oppose the working families tax credit. They are against everything that the Government have proposed—the new deal, health service and welfare reforms and reform of the other place.
The Gracious Speech is work in progress in this Parliament. It outlines work to deliver on the priorities of the people at the general election, today and in the future. Those were the Government's priorities then and they our priorities now; that is our programme and the programme of the Gracious Speech.

Question put, That the amendment be made:—

The House divided: Ayes 134, Noes 373.

Division No. 2]
[10 pm


AYES


Ainsworth, Peter (E Surrey)
Goodlad, Rt Hon Sir Alastair


Ancram, Rt Hon Michael
Gorman, Mrs Teresa


Arbuthnot, Rt Hon James
Gray, James


Atkinson, Peter (Hexham)
Green, Damian


Beggs, Roy
Greenway, John


Bercow, John
Grieve, Dominic


Beresford, Sir Paul
Gummer, Rt Hon John


Blunt, Crispin
Hamilton, Rt Hon Sir Archie


Boswell, Tim
Hammond, Philip


Bottomley, Peter (Worthing W)
Hawkins, Nick


Bottomley, Rt Hon Mrs Virginia
Hayes, John


Brady, Graham
Heald, Oliver


Brazier, Julian
Heath, Rt Hon Sir Edward


Brooke, Rt Hon Peter
Horam, John


Browning, Mrs Angela
Howard, Rt Hon Michael


Bruce, Ian (S Dorset)
Howarth, Gerald (Aldershot)


Burns, Simon
Hunter, Andrew


Butterfill, John
Jack, Rt Hon Michael


Cash, William
Jackson, Robert (Wantage)


Chope, Christopher
Jenkin, Bernard


Clappison, James
King, Rt Hon Tom (Bridgwater)


Clark, Rt Hon Alan (Kensington)
Kirkbride, Miss Julie


Clarke, Rt Hon Kenneth (Rushcliffe)
Laing, Mrs Eleanor



Lait, Mrs Jacqui


Clifton-Brown, Geoffrey
Lansley, Andrew


Collins, Tim
Leigh, Edward


Cormack, Sir Patrick
Letwin, Oliver


Cran, James
Lewis, Dr Julian (New Forest E)


Curry, Rt Hon David
Lidington, David


Davies, Quentin (Grantham)
Lloyd, Rt Hon Sir Peter (Fareham)


Day, Stephen
Loughton, Tim


Dorrell, Rt Hon Stephen
Luff, Peter


Duncan, Alan
Lyell, Rt Hon Sir Nicholas


Duncan Smith, Iain
MacGregor, Rt Hon John


Evans, Nigel
McIntosh, Miss Anne


Faber, David
MacKay, Rt Hon Andrew


Fallon, Michael
Maclean, Rt Hon David


Flight, Howard
McLoughlin, Patrick


Forth, Rt Hon Eric
Malins, Humfrey


Fowler, Rt Hon Sir Norman
Maples, John


Fraser, Christopher
Mates, Michael


Gale, Roger
Maude, Rt Hon Francis


Garnier, Edward
May, Mrs Theresa


Gibb, Nick
Moss, Malcolm





Nicholls, Patrick
Syms, Robert


Norman, Archie
Tapsell, Sir Peter


Page, Richard
Taylor, Ian (Esher & Walton)


Paice, James
Taylor, John M (Solihull)


Paisley, Rev Ian
Taylor, Sir Teddy


Paterson, Owen
Thompson, William


Pickles, Eric
Tredinnick, David


Prior, David
Trend, Michael


Redwood, Rt Hon John
Tyrie, Andrew


Robathan, Andrew
Viggers, Peter


Robertson, Laurence (Tewk'b'ry)
Wardle, Charles 


Roe, Mrs Marion (Broxbourne)
Waterson, Nigel


Ross, William (E Lond'y)
Wells, Bowen


Rowe, Andrew (Faversham)
Whitney, Sir Raymond



Whittingdale, John


Ruffley, David
Widdecombe, Rt Hon Miss Ann


St Aubyn, Nick
Wilkinson, John


Sayeed, Jonathan
Winterton, Mrs Ann (Congleton)


Shepherd, Richard
Winterton, Nicholas (Macclesfield)


Smyth, Rev Martin (Belfast S)
Woodward, Shaun


Soames, Nicholas
Yeo, Tim


Spring, Richard
Young, Rt Hon Sir George


Stanley, Rt Hon Sir John



Steen, Anthony
Tellers for the Ayes:


Streeter, Gary
Sir David Madel and Mrs. Caroline Spelman.


Swayne, Desmond



NOES


Abbott, Ms Diane
Burstow, Paul


Ainger, Nick
Byers, Rt Hon Stephen


Ainsworth, Robert (Cov'try NE)
Cable, Dr Vincent


Alexander, Douglas
Caborn, Richard


Allan, Richard
Campbell, Alan (Tynemouth)


Allen, Graham
Campbell, Mrs Anne (C'bridge)


Anderson, Donald (Swansea E)
Campbell, Menzies (NE Fife)


Anderson, Janet (Rossendale)
Campbell, Ronnie (Blyth V)


Armstrong, Ms Hilary
Campbell-Savours, Dale


Ashton, Joe
Canavan, Dennis


Atherton, Ms Candy
Caplin, Ivor


Atkins, Charlotte
Casale, Roger


Baker, Norman
Caton, Martin


Ballard, Jackie
Chapman, Ben (Wirral S)


Barnes, Harry
Chaytor, David


Barron, Kevin
Chidgey, David


Battle, John
Clapham, Michael


Bayley, Hugh
Clark, Rt Hon Dr David (S Shields)


Beard, Nigel
Clark, Dr Lynda (Edinburgh Pentlands)


Beckett, Rt Hon Mrs Margaret



Begg, Miss Anne
Clark, Paul (Gillingham)


Beith, Rt Hon A J
Clarke, Charles (Norwich S)


Bell, Martin (Tatton)
Clarke, Eric (Midlothian)


Bell, Stuart (Middlesbrough)
Clarke, Rt Hon Tom (Coatbridge)


Benn, Rt Hon Tony
Clarke, Tony (Northampton S)


Berry, Roger
Clelland, David


Best, Harold
Clwyd, Ann


Betts, Clive
Coffey, Ms Ann


Blackman, Liz
Cohen, Harry


Blears, Ms Hazel
Coleman, Iain


Blizzard, Bob
Connarty, Michael


Blunkett, Rt Hon David
Cook, Frank (Stockton N)


Boateng, Paul
Cooper, Yvette


Borrow, David
Corbett, Robin


Bradley, Keith (Withington)
Corbyn, Jeremy


Bradshaw, Ben
Corston, Ms Jean


Brake, Tom
Cotter, Brian


Brand, Dr Peter
Cousins, Jim


Breed, Colin
Cranston, Ross


Brinton, Mrs Helen
Crausby, David


Brown, Rt Hon Nick (Newcastle E)
Cryer, John (Hornchurch)


Brown, Russell (Dumfries)
Cummings, John


Browne, Desmond
Cunningham, Jim (Cov'try S)


Bruce, Malcolm (Gordon)
Curtis-Thomas, Mrs Claire


Buck, Ms Karen
Dafis, Cynog


Burden, Richard
Dalyell, Tam


Burgon, Colin
Darling, Rt Hon Alistair


Burnett, John
Darvill, Keith






Davey, Edward (Kingston)
Hopkins, Kelvin


Davey, Valerie (Bristol W)
Howarth, Alan (Newport E)


Davidson, Ian
Howarth, George (Knowsley N)


Davies, Rt Hon Denzil (Llanelli)
Hoyle, Lindsay


Davies, Geraint (Croydon C)
Hughes, Kevin (DoncasterN)


Davies, Rt Hon Ron (Caerphilly)
Hughes, Simon (Southwark N)


Dean, Mrs Janet
Humble, Mrs Joan


Denham, John
Hurst, Alan


Dewar, Rt Hon Donald
Hutton, John


Dismore, Andrew
Iddon, Dr Brian


Dobbin, Jim
Illsley, Eric


Dobson, Rt Hon Frank
Jackson, Helen (Hillsborough)


Donohoe, Brian H
Jamieson, David


Doran, Frank
Jenkins, Brian


Dowd, Jim
Johnson, Alan (Hull W & Hessle)


Drew, David
Johnson, Miss Melanie (Welwyn Hatfield)


Eagle, Angela (Wallasey)



Edwards, Huw
Jones, Barry (Alyn & Deeside)


Efford, Clive
Jones, Mrs Fiona (Newark)


Ennis, Jeff
Jones, Helen (Warrington N)


Ewing, Mrs Margaret
Jones, Ieuan Wyn (Ynys Môn)


Fatchett, Derek
Jones, Jon Owen (Cardiff C)


Fearn, Ronnie
Jones, Dr Lynne (Selly Oak)


Field, Rt Hon Frank
Jones, Martyn (Clwyd S)


Fisher, Mark
Jones, Nigel (Cheltenham)


Fitzpatrick, Jim
Keeble, Ms Sally


Fitzsimons, Lorna
Keen, Alan (Feltham & Heston)


Flint, Caroline
Keen, Ann (Brentford & Isleworth)


Follett, Barbara
Keetch, Paul


Foster, Rt Hon Derek
Kemp, Fraser


Foster, Don (Bath)
Kennedy, Charles (Ross Skye)


Foster, Michael Jabez (Hastings)
Kennedy, Jane (Wavertree)


Foster, Michael J (Worcester)
Khabra, Piara S


Fyfe, Maria
Kidney, David


Galloway, George
Kilfoyle, Peter


Gapes, Mike
King, Andy (Rugby & Kenilworth)


Gardiner, Barry
King, Ms Oona (Bethnal Green)


George, Andrew (St Ives)
Kingham, Ms Tess


George, Bruce (Walsall S)
Kirkwood, Archy


Gerrard, Neil
Kumar, Dr Ashok


Gibson, Dr Ian
Ladyman, Dr Stephen


Gilroy, Mrs Linda
Lawrence, Ms Jackie


Godman, Dr Norman A
Laxton, Bob


Godsiff, Roger
Lepper, David


Goggins, Paul
Leslie, Christopher


Golding, Mrs Llin
Levitt, Tom


Gordon, Mrs Eileen
Lewis, Ivan (Bury S)


Gorrie, Donald
Lewis, Terry (Worsley)


Griffiths, Jane (Reading E)
Linton, Martin


Griffiths, Nigel (Edinburgh S)
Livingstone, Ken


Griffiths, Win (Bridgend)
Livsey, Richard


Grocott, Bruce
Llwyd, Elfyn


Grogan, John
Lock, David


Gunnell, John
Love, Andrew


Hain, Peter
McAvoy, Thomas


Hall, Patrick (Bedford)
McCabe, Steve


Hamilton, Fabian (Leeds NE)
McCafferty, Ms Chris


Hancock, Mike
McDonagh, Siobhain


Hanson, David
McDonnell, John


Harman, Rt Hon Ms Harriet
McFall, John


Harris, Dr Evan
McIsaac, Shona


Harvey, Nick
McKenna, Mrs Rosemary


Heal, Mrs Sylvia
Mackinlay, Andrew


Healey, John
McLeish, Henry


Heath, David (Somerton & Frome)
McNulty, Tony


Henderson, Ivan (Harwich)
McWilliam, John


Hepburn, Stephen
Mahon, Mrs Alice


Heppell, John
Mallaber, Judy


Hesford, Stephen
Mandelson, Rt Hon Peter


Hill, Keith
Marsden, Gordon (Blackpool S)


Hinchliffe, David
Marsden, Paul (Shrewsbury)


Hodge, Ms Margaret
Marshall, David (Shettleston)


Hoey, Kate
Marshall-Andrews, Robert


Home Robertson, John
Martlew, Eric


Hoon, Geoffrey
Maxton, John


Hope, Phil
Meacher, Rt Hon Michael





Michael, Alun
Singh, Marsha


Michie, Bill (Shefl'd Heeley)
Skinner, Dennis


Michie, Mrs Ray (Argyll & Bute)
Smith, Jacqui (Redditch)


Milburn, Alan
Smith, John (Glamorgan)


Miller, Andrew
Smith, Llew (Blaenau Gwent)


Mitchell, Austin
Smith, Sir Robert (W Ab'd'ns)


Moffatt, Laura
Snape, Peter


Moonie, Dr Lewis
Soley, Clive


Moore, Michael
Southworth, Ms Helen


Moran, Ms Margaret
Spellar, John


Morgan, Ms Julie (Cardiff N)
Squire, Ms Rachel


Morgan, Rhodri (Cardiff W)
Starkey, Dr Phyllis


Morley, Elliot
Steinberg, Gerry


Morris, Ms Estelle (B'ham Yardley)
Stewart, David (Inverness E)


Murphy, Denis (Wansbeck)
Stewart, Ian (Eccles)


Norris, Dan
Stinchcombe, Paul


Oaten, Mark
Stoate, Dr Howard


O'Brien, Bill (Normanton)
Stott, Roger


O'Brien, Mike (N Warks)
Strang, Rt Hon Dr Gavin


O'Hara, Eddie
Stuart, Ms Gisela


O'Neill, Martin
Stunell, Andrew


Öpik, Lembit
Sutcliffe, Gerry


Organ, Mrs Diana
Swinney, John


Osborne, Ms Sandra
Taylor, Rt Hon Mrs Ann


Palmer, Dr Nick
(Dewsbury)


Pearson, Ian
Taylor, Ms Dari (Stockton S)


Pendry, Tom
Taylor, David (NW Leics)


Perham, Ms Linda
Taylor, Matthew (Truro)


Pickthall, Colin
Temple-Morris, Peter


Plaskitt, James
Thomas, Gareth (Clwyd W)


Pollard, Kerry
Timms, Stephen


Pond, Chris
Tipping, Paddy


Pope, Greg
Todd, Mark


Pound, Stephen
Tonge, Dr Jenny


Powell, Sir Raymond
Touhig, Don


Prentice, Ms Bridget (Lewisham E)
Trickett, Jon



Truswell, Paul


Prentice, Gordon (Pendle)
Turner, Dennis (Wolverh'ton SE)


Prescott, Rt Hon John



Prosser, Gwyn
Turner, Dr Desmond (Kemptown)


Purchase, Ken
Turner, Dr George (NW Norfolk)


Quinn, Lawrie
Twigg, Derek (Halton)


Rammell, Bill
Tyler, Paul



Wallace, James


Raynsford, Nick
Walley, Ms Joan


Reed, Andrew (Loughborough)
Ward, Ms Claire


Reid, Rt Hon Dr John (Hamilton N)



Rendel, David
Wareing, Robert N



Watts, David


Robinson, Geoffrey (Cov'try NW)
Webb, Steve


Roche, Mrs Barbara
Welsh, Andrew


Rooker, Jeff
White, Brian


Rooney, Terry
Wigley, Rt Hon Dafydd


Ross, Ernie (Dundee W)
Williams, Rt Hon Alan (Swansea W)


Rowlands, Ted



Roy, Frank
Williams, Alan W (E Carmarthen)


Ruddock, Ms Joan
Willis, Phil


Russell, Bob (Colchester)
Wills, Michael


Salmond, Alex
Winnick, David


Salter, Martin
Winterton, Ms Rosie (Doncaster C)


Sanders, Adrian
Wise, Audrey


Sarwar, Mohammad
Woolas, Phil


Savidge, Malcolm
Worthington, Tony


Sawford, Phil
Wright, Anthony D (Gt Yarmouth)


Sedgemore, Brian
Wyatt, Derek


Shaw, Jonathan



Sheerman, Barry
Tellers for the Noes:


Sheldon, Rt Hon Robert
Mr. Mike Hall and Mrs. Anne McGuire.


Simpson, Alan (Nottingham S)

Question accordingly negatived.

Amendment proposed, at the end of the Question, to add,
But humbly regret, while supporting some proposals in the Gracious Speech, such as those which address the issues of ending the voting rights of hereditary peers and improving the administration of the tax and national insurance system, the absence


of key measures in the Gracious Speech to modernise the United Kingdom, including a comprehensive package of environmental policies to tackle pollution, reduce car journeys and switch travel to public transport, a second tier pension scheme, a judicial process to replace the Child Support Agency and the introduction of a parliamentary committee to scrutinise arms exports; believe that additional measures to improve public health, reduce class sizes, abolish tuition fees, widen the provision of early years education and to tackle age discrimination and other forms of inequality should have been brought forward; call for urgent measures to pave the way for Britain's membership of a successful single currency and to grant proper financial independence and a fair and proportional voting system to local government; further regret any delays in introducing a Food Standards Agency; deprecate the absence of rapid progress on measures to ensure a wide-ranging Freedom of Information Act, to pave the way for a referendum on a fair voting system for the House of Commons and to deliver a fully reformed and predominantly elected Second Chamber; and support all possible early steps to speed the passage of the European Parliamentary Elections Bill in order to allow the 1999 European parliamentary elections to be held under a fairer, proportional, voting system.—[Mr. Beith.]

Question put forthwith, pursuant to Standing Order No. 33 (Calling of amendments at end of debate), That the amendment be made:—

The House divided: Ayes 51, Noes 317.

Division No. 3]
[10.15 pm


AYES


Allan, Richard
Jones, Nigel (Cheltenham)


Baker, Norman
Keetch, Paul


Ballard, Jackie
Kennedy, Charles (Ross Skye)


Beith, Rt Hon A J
Kirkwood, Archy


Bell, Martin (Tatton)
Livsey, Richard


Brake, Tom
Llwyd, Elfyn


Brand, Dr Peter
Michie, Mrs Ray (Argyll & Bute)


Breed, Colin
Moore, Michael


Bruce, Malcolm (Gordon)
Oaten, Mark


Burnett, John
Öpik, Lembit


Burstow, Paul
Rendel, David


Cable, Dr Vincent
Russell, Bob (Colchester)


Campbell, Menzies (NE Fife)
Salmond, Alex



Sanders, Adrian


Chidgey, David
Smith, Sir Robert (W Ab'd'ns)


Cotter, Brian
Swinney, John


Dafis, Cynog
Taylor, Matthew (Truro)


Davey, Edward (Kingston)
Tonge, Dr Jenny


Ewing, Mrs Margaret
Tyler, Paul


Fearn, Ronnie
Wallace, James


Foster, Don (Bath)
Webb, Steve


George, Andrew (St Ives)
Welsh, Andrew


Hancock, Mike
Wigley, Rt Hon Dafydd


Harris, Dr Evan
Willis, Phil


Harvey, Nick



Heath, David (Somerton & Frome)
Tellers for the Ayes:


Hughes, Simon (Southwark N)
Mr. Andrew Stunell and Mr. Donald Gorrie.


Jones, Ieuan Wyn (Ynys MÖn)



NOES


Abbott, Ms Diane
Beard, Nigel


Ainger, Nick
Beckett, Rt Hon Mrs Margaret


Ainsworth, Robert (Cov'try NE)
Begg, Miss Anne


Alexander, Douglas
Bell, Stuart (Middlesbrough)


Allen, Graham
Benn, Rt Hon Tony


Anderson, Donald (Swansea E)
Berry, Roger


Anderson, Janet (Rossendale)
Best, Harold


Armstrong, Ms Hilary
Betts, Clive


Ashton, Joe
Blackman, Liz


Atherton, Ms Candy
Blears, Ms Hazel


Atkins, Charlotte
Blizzard, Bob


Barnes, Harry
Blunkett, Rt Hon David


Barron, Kevin
Boateng, Paul


Battle, John
Borrow, David


Bayley, Hugh
Bradley, Keith (Withington)





Bradshaw, Ben
Foster, Rt Hon Derek


Brinton, Mrs Helen
Foster, Michael Jabez (Hastings)


Brown, Rt Hon Nick (Newcastle E)
Foster, Michael J (Worcester)


Brown, Russell (Dumfries)
Fyfe, Maria


Browne, Desmond
Galloway, George


Buck, Ms Karen
Gapes, Mike


Burden, Richard
Gardiner, Barry


Burgon, Colin
George, Bruce (Walsall S)


Byers, Rt Hon Stephen
Gerrard, Neil


Caborn, Richard
Gibson, Dr Ian


Campbell, Alan (Tynemouth)
Gilroy, Mrs Linda


Campbell, Mrs Anne (C'bridge)
Godman, Dr Norman A


Campbell, Ronnie (Blyth V)
Godsiff, Roger


Campbell-Savours, Dale
Goggins, Paul


Canavan, Dennis
Golding, Mrs Llin


Caplin, Ivor
Gordon, Mrs Eileen


Casale, Roger
Griffiths, Jane (Reading E)


Caton, Martin
Griffiths, Nigel (Edinburgh S)


Chapman, Ben (Wirral S)
Griffiths, Win (Bridgend)


Chaytor, David
Grocott, Bruce


Clapham, Michael
Grogan, John


Clark, Rt Hon Dr David (S Shields)
Gunnell, John


Clark, Dr Lynda (Edinburgh Pentlands)
Hain, Peter



Hall, Patrick (Bedford)


Clark, Paul (Gillingham)
Hamilton, Fabian (Leeds NE)


Clarke, Charles (Norwich S)
Hanson, David


Clarke, Eric (Midlothian)
Harman, Rt Hon Ms Harriet


Clarke, Rt Hon Tom (Coatbridge)
Heal, Mrs Sylvia


Clarke, Tony (Northampton S)
Healey, John


Clelland, David
Henderson, Ivan (Harwich)


Clwyd, Ann
Hepburn, Stephen


Coffey, Ms Ann
Heppell, John


Cohen, Harry
Hesford, Stephen


Coleman, Iain
Hill, Keith


Connarty, Michael
Hinchliffe, David


Cook, Frank (Stockton N)
Hodge, Ms Margaret


Cooper, Yvette
Hoey, Kate


Corbett, Robin
Home Robertson, John


Corbyn, Jeremy
Hoon, Geoffrey


Corston, Ms Jean
Hope, Phil


Cousins, Jim
Hopkins, Kelvin


Cranston, Ross
Howarth, Alan (Newport E)


Crausby, David
Howarth, George (Knowsley N)


Cryer, John (Hornchurch)
Hoyle, Lindsay


Cummings, John
Hughes, Kevin (Doncaster N)


Cunningham, Jim (Cov'try S)
Humble, Mrs Joan


Curtis-Thomas, Mrs Claire
Hurst, Alan


Dalyell, Tam
Hutton, John


Darling, Rt Hon Alistair
Iddon, Dr Brian


Darvill, Keith
Illsley, Eric


Davey, Valerie (Bristol W)
Jackson, Helen (Hillsborough)


Davidson, Ian
Jamieson, David


Davies, Rt Hon Denzil (Llanelli)
Jenkins, Brian


Davies, Geraint (Croydon C)
Johnson, Alan (Hull W & Hessle)


Davies, Rt Hon Ron (Caerphilly)
Johnson, Miss Melanie (Welwyn Hatfield)


Dean, Mrs Janet



Denham, John
Jones, Barry (Alyn & Deeside)


Dewar, Rt Hon Donald
Jones, Mrs Fiona (Newark)


Dismore, Andrew
Jones, Helen (Warrington N)


Dobbin, Jim
Jones, Jon Owen (Cardiff C)


Dobson, Rt Hon Frank
Jones, Dr Lynne (Selly Oak)


Donohoe, Brian H
Jones, Martyn (Clwyd S)


Doran, Frank
Keeble, Ms Sally


Dowd, Jim
Keen, Alan (Feltham & Heston)


Drew, David
Keen, Ann (Brentford & Isleworth)


Eagle, Angela (Wallasey)
Kemp, Fraser


Edwards, Huw
Kennedy, Jane (Wavertree)


Efford, Clive
Khabra, Piara S


Ennis, Jeff
Kidney, David


Fatchett, Derek
Kilfoyle, Peter


Field, Rt Hon Frank
King, Andy (Rugby & Kenilworth)


Fisher, Mark
King, Ms Oona (Bethnal Green)


Fitzpatrick, Jim
Kingham, Ms Tess


Fitzsimons, Lorna
Kumar, Dr Ashok


Flint, Caroline
Ladyman, Dr Stephen


Follett, Barbara
Laxton, Bob






Lepper, David
Reid, Rt Hon Dr John (Hamilton N)


Leslie, Christopher
Robinson, Geoffrey (Cov'try NW)


Levitt, Tom
Roche, Mrs Barbara


Lewis, Ivan (Bury S)
Rooker, Jeff


Lewis, Terry (Worsley)
Rooney, Terry


Linton, Martin
Ross, Ernie (Dundee W)


Livingstone, Ken
Rowlands, Ted


Lock, David
Roy, Frank


Love, Andrew
Ruddock, Ms Joan


McAvoy, Thomas
Salter, Martin


McCabe, Steve
Savidge, Malcolm


McCafferty, Ms Chris
Sawford, Phil


McDonagh, Siobhain
Sedgemore, Brian


McDonnell, John
Shaw, Jonathan


McFall, John
Sheerman, Barry


McIsaac, Shona
Sheldon, Rt Hon Robert


McKenna, Mrs Rosemary
Simpson, Alan (Nottingham S)


Mackinlay, Andrew
Singh, Marsha


McLeish, Henry
Skinner, Dennis


McNulty, Tony
Smith, Jacqui (Redditch)


McWilliam, John
Smith, Llew (Blaenau Gwent)


Mahon, Mrs Alice
Snape, Peter


Mallaber, Judy
Soley, Clive


Mandelson, Rt Hon Peter
Southworth, Ms Helen


Marsden, Gordon (Blackpool S)
Spellar, John


Marsden, Paul (Shrewsbury)
Squire, Ms Rachel


Marshall, David (Shettleston)
Starkey, Dr Phyllis


Marshall-Andrews, Robert
Steinberg, Gerry


Martlew, Eric
Stewart, David (Inverness E)


Maxton, John
Stewart, Ian (Eccles)


Meacher, Rt Hon Michael
Stinchcombe, Paul


Michael, Alun
Stoate, Dr Howard


Michie, Bill (Shef'ld Heeley)
Stott, Roger


Milburn, Alan
Strang, Rt Hon Dr Gavin


Miller, Andrew
Stuart, Ms Gisela


Mitchell, Austin
Sutcliffe, Gerry


Moffatt, Laura
Taylor, Rt Hon Mrs Ann (Dewsbury)


Moonie, Dr Lewis



Moran, Ms Margaret
Taylor, Ms Dari (Stockton S)


Morgan, Ms Julie (Cardiff N)
Taylor, David (NW Leics)


Morgan, Rhodri (Cardiff W)
Temple-Morris Peter


Morley, Elliot
Thomas, Gareth (Clwyd W)


Morris, Ms Estelle (B'ham Yardley)
Timms, Stephen


Murphy, Denis (Wansbeck)
Tipping, Paddy


Norris, Dan
Todd, Mark


O'Brien, Bill (Normanton)
Touhig, Don



Trickett, Jon


O'Brien, Mike (N Warks)
Truswell, Paul


O'Hara, Eddie
Turner, Dennis (Wolverh'ton SE)


O'Neill, Martin
Turner, Dr Desmond (Kemptown)


Organ, Mrs Diana
Turner, Dr George (NW Norfolk)


Osborne, Ms Sandra
Twigg, Derek (Halton)


Palmer, Dr Nick
Walley, Ms Joan


Pearson, Ian
Ward, Ms Claire


Pendry, Tom
Wareing, Robert N


Perham, Ms Linda
Watts, David


Pickthall, Colin
White, Brian


Plaskitt, James
Williams, Rt Hon Alan (Swansea W)


Pollard, Kerry



Pond, Chris
Williams, Alan W (E Carmarthen)


Pope, Greg
Wills, Michael


Pound, Stephen
Winnick, David


Powell, Sir Raymond
Winterton, Ms Rosie (Doncaster C)


Prentice, Ms Bridget (Lewisham E)
Wise, Audrey


Prentice, Gordon (Pendle)
Woolas, Phil


Prescott, Rt Hon John
Worthington, Tony


Prosser, Gwyn
Wright, Anthony D (Gt Yarmouth)


Purchase, Ken
Wyatt, Derek


Quinn, Lawrie



Rammell, Bill
Tellers for the Noes:


Raynsford, Nick
Mrs. Anne McGuire and Mr. Mike Hall.


Reed, Andrew (Loughborough)

Question accordingly negatived.

Main Question put:—

The House divided: Ayes 317, Noes 168.

Division No. 4]
[10.28 pm


AYES


Abbott, Ms Diane
Crausby, David


Ainger, Nick
Cryer, John (Hornchurch)


Ainsworth, Robert (Cov'try NE)
Cummings, John


Alexander, Douglas
Cunningham, Jim (Cov'try S)


Allen, Graham
Curtis-Thomas, Mrs Claire


Anderson, Donald (Swansea E)
Dalyell, Tam


Anderson, Janet (Rossendale)
Darling, Rt Hon Alistair


Armstrong, Ms Hilary
Darvill, Keith


Ashton, Joe
Davey, Valerie (Bristol W)


Atherton, Ms Candy
Davidson, Ian


Atkins, Charlotte
Davies, Rt Hon Denzil (Llanelli)


Barnes, Harry
Davies, Geraint (Croydon C)


Barron, Kevin
Dean, Mrs Janet


Battle, John
Denham, John


Bayley, Hugh
Dewar, Rt Hon Donald


Beard, Nigel
Dismore, Andrew


Beckett, Rt Hon Mrs Margaret
Dobbin, Jim


Begg, Miss Anne
Dobson, Rt Hon Frank


Bell, Martin (Tatton)
Donohoe, Brian H


Bell, Stuart (Middlesbrough)
Doran, Frank


Benn, Rt Hon Tony
Dowd, Jim


Berry, Roger
Drew, David


Best, Harold
Eagle, Angela (Wallasey)


Betts, Clive
Edwards, Huw


Blackman, Liz
Efford, Clive


Blears, Ms Hazel
Ennis, Jeff


Blizzard, Bob
Fatchett, Derek


Blunkett, Rt Hon David
Field, Rt Hon Frank


Boateng, Paul
Fisher, Mark


Borrow, David
Fitzpatrick, Jim


Bradley, Keith (Withington)
Fitzsimons, Lorna


Bradshaw, Ben
Flint, Caroline


Brinton, Mrs Helen
Follett, Barbara


Brown, Rt Hon Nick (Newcastle E)
Foster, Rt Hon Derek


Brown, Russell (Dumfries)
Foster, Michael Jabez (Hastings)


Browne, Desmond
Foster, Michael J (Worcester)


Buck, Ms Karen
Fyfe, Maria


Burden, Richard
Galloway, George


Burgon, Colin



Byers, Rt Hon Stephen
Gapes, Mike


Caborn, Richard
Gardiner, Barry


Campbell, Alan (Tynemouth)
George, Bruce (Walsall S)


Campbell, Mrs Anne (C'bridge)
Gerrard, Neil


Campbell, Ronnie (Blyth V)
Gibson, Dr Ian


Campbell-Savours, Dale
Gilroy, Mrs Linda


Canavan, Dennis
Godman, Dr Norman A


Caplin, Ivor
Godsiff, Roger


Casale, Roger
Goggins, Paul


Caton, Martin
Golding, Mrs Llin


Chapman, Ben (Wirral S)
Gordon, Mrs Eileen


Chaytor, David
Griffiths, Jane (Reading E)


Clapham, Michael
Griffiths, Nigel (Edinburgh S)


Clark, Rt Hon Dr David (S Shields)
Griffiths, Win (Bridgend)


Clark, Dr Lynda (Edinburgh Pentlands)
Grocott, Bruce



Grogan, John


Clark, Paul (Gillingham)
Gunnell, John


Clarke, Charles (Norwich S)
Hain, Peter


Clarke, Eric (Midlothian)
Hall, Patrick (Bedford)


Clarke, Rt Hon Tom (Coatbridge)
Hamilton, Fabian (Leeds NE)


Clarke, Tony (Northampton S)
Hanson, David


Clelland, David
Harman, Rt Hon Ms Harriet


Clwyd, Ann
Heal, Mrs Sylvia


Coffey, Ms Ann
Healey, John


Cohen, Harry
Henderson, Ivan (Harwich)


Coleman, Iain
Heppell, John


Connarty, Michael
Hesford, Stephen


Cook, Frank (Stockton N)
Hill, Keith


Cooper, Yvette
Hinchliffe, David


Corbett, Robin
Hodge, Ms Margaret


Corbyn, Jeremy
Hoey, Kate


Corston, Ms Jean
Home Robertson, John


Cousins, Jim
Hoon, Geoffrey


Cranston, Ross
Hope, Phil






Hopkins, Kelvin
Morgan, Ms Julie (Cardiff N)


Howarth, Alan (Newport E)
Morgan, Rhodri (Cardiff W)


Howarth, George (Knowsley N)
Morley, Elliot


Hoyle, Lindsay
Morris, Ms Estelle (B'ham Yardley)


Hughes, Kevin (Doncaster N)
Murphy, Denis (Wansbeck)


Humble, Mrs Joan
Norris, Dan


Hurst, Alan
O'Brien, Bill (Normanton)


Hutton, John
O'Brien, Mike (N Warks)


Iddon, Dr Brian
O'Hara, Eddie


Illsley, Eric
O'Neill, Martin


Jackson, Helen (Hillsborough)
Organ, Mrs Diana


Jamieson, David
Osborne, Ms Sandra


Jenkins, Brian
Palmer, Dr Nick


Johnson, Alan (Hull W& Hessle)
Pearson, Ian


Johnson, Miss Melanie (Welwyn Hatfield)
Pendry, Tom



Perham, Ms Linda


Jones, Barry (Alyn & Deeside)
Pickthall, Colin


Jones, Mrs Fiona (Newark)
Plaskitt, James


Jones, Helen (Warrington N)
Pollard, Kerry Pond, Chris


Jones, Jon Owen (Cardiff C)



Jones, Dr Lynne (Selly Oak)



Jones, Martyn (Clwyd S)
Pope, Greg


Keeble, Ms Sally
Pound, Stephen


Keen, Alan (Feltham & Heston)
Prentice, Ms Bridget (Lewisham E)


Keen, Ann (Brentford & Isleworth)
Prentice, Gordon (Pendle)


Kemp, Fraser
Prescott, Rt Hon John


Kennedy, Jane (Wavertree)
Prosser, Gwyn


Khabra, Piara S
Purchase, Ken


Kidney, David
Quinn, Lawrie


Kilfoyle, Peter
Rammell, Bill


King, Andy (Rugby & Kenilworth)
Raynsford, Nick


King, Ms Oona (Bethnal Green)
Reed, Andrew (Loughborough)


Kingham, Ms Tess
Reid, Rt Hon Dr John (Hamilton N)


Kumar, Dr Ashok
Robinson, Geoffrey (Cov'tryNW)


Ladyman, Dr Stephen
Roche, Mrs Barbara


Lawrence, Ms Jackie
Rooker, Jeff


Laxton, Bob
Rooney, Terry


Lepper, David
Ross, Ernie (Dundee W)


Leslie, Christopher
Rowlands, Ted


Levitt, Tom
Roy, Frank


Lewis, Ivan (Bury S)
Ruddock, Ms Joan


Lewis, Terry (Worsley)
Salter, Martin


Linton, Martin
Savidge, Malcolm


Livingstone, Ken
Sawford, Phil


Lock, David
Sedgemore, Brian


Love, Andrew
Shaw, Jonathan


McAvoy, Thomas
Sheerman, Barry


McCabe, Steve
Simpson, Alan (Nottingham S)


McCafferty, Ms Chris
Singh, Marsha


McDonagh, Siobhain
Skinner, Dennis


McDonnell, John
Smith, Jacqui (Redditch)


McFall, John McIsaac, Shona
Smith, John (Glamorgan)


McKenna, Mrs Rosemary
Smith, Llew (Blaenau Gwent)


Mackinlay, Andrew
Snape, Peter



Soley, Clive


McLeish, Henry
Southworth, Ms Helen


McNulty, Tony
Spellar, John


McWilliam, John



Mahon, Mrs Alice
Squire, Ms Rachel


Mallaber, Judy
Starkey, Dr Phyllis


Mandelson, Fit Hon Peter
Steinberg, Gerry


Marsden, Gordon (Blackpool S)
Stewart, David (Inverness E)


Marsden, Paul (Shrewsbury)
Stewart, Ian (Ecoles)


Marshall, David (Shettleston)
Stinchcombe, Paul


Marshall-Andrews, Robert
Stoate, Dr Howard


Martlew, Eric
Stott, Roger


Maxton, John
Strang, Rt Hon Dr Gavin


Meacher, Rt Hon Michael
Stuart, Ms Gisela


Michael, Alun
Sutcliffe, Gerry


Michie, Bill (Shef'ld Heeley)
Taylor, Rt Hon Mrs Ann (Dewsbury)


Milburn, Alan



Miller, Andrew
Taylor, Ms Dari (Stockton S)


Mitchell, Austin
Taylor, David (NW Leics)


Moffatt, Laura
Temple-Morris, Peter


Moonie, Dr Lewis
Thomas, Gareth (Clwyd W)


Moran, Ms Margaret
Timms, Stephen





Tipping, Paddy
Williams, Rt Hon Alan (Swansea W)


Todd, Mark



Touhig, Don
Williams, Alan W (E Carmarthen)


Trickett, Jon
Wills, Michael


Truswell, Paul
Winnick, David


Turner, Dennis (Wolverh'ton SE)
Winterton, Ms Rosie (Doncaster C)


Turner, Dr Desmond (Kemptown)
Wise, Audrey


Turner, Dr George (NW Norfolk)
Woolas, Phil


Twigg, Derek (Halton)
Worthington, Tony


Walley, Ms Joan
Wright, Anthony D (Gt Yarmouth)


Ward, Ms Claire
Wyatt, Derek


Wareing, Robert N



Watts, David
Tellers for the Ayes:


White, Brian
Mrs. Anne McGuire and Mr. Mike Hall.


Wicks, Malcolm



NOES


Ainsworth, Peter (E Surrey)
Gorman, Mrs Teresa


Allan, Richard
Gorrie, Donald


Ancram, Rt Hon Michael
Gray, James


Arbuthnot, Rt Hon James
Green, Damian


Atkinson, Peter (Hexham)
Greenway, John


Baker, Norman
Gummer, Rt Hon John


Ballard, Jackie
Hamilton, Rt Hon Sir Archie


Beith, Rt Hon A J
Hammond, Philip


Bercow, John
Hancock, Mike


Beresford, Sir Paul
Harris, Dr Evan


Blunt, Crispin
Harvey, Nick


Boswell, Tim
Hawkins, Nick


Bottomley, Peter (Worthing W)
Hayes, John


Bottomley, Rt Hon Mrs Virginia
Heald, Oliver


Brady, Graham
Heath, David (Somerton & Frome)


Brake, Tom
Horam, John


Brand, Dr Peter
Howard, Rt Hon Michael


Brazier, Julian
Howarth, Gerald (Aldershot)


Breed, Colin
Hughes, Simon (Southwark N)


Brooke, Rt Hon Peter
Hunter, Andrew


Browning, Mrs Angela
Jack, Rt Hon Michael


Bruce, Ian (S Dorset)
Jenkin, Bernard


Bruce, Malcolm (Gordon)
Keetch, Paul


Burnett, John
Kennedy, Charles (Ross Skye)


Burns, Simon
King, Rt Hon Tom (Bridgwater)


Burstow, Paul
Kirkbride, Miss Julie


Butterfill, John
Kirkwood, Archy


Campbell, Menzies (NE Fife)
Laing, Mrs Eleanor


Cash, William
Lait, Mrs Jacqui


Chidgey, David
Lansley, Andrew


Chope, Christopher
Leigh, Edward


Clappison, James
Letwin, Oliver


Clarke, Rt Hon Kenneth (Rushcliffe)
Lewis, Dr Julian (New Forest E)



Lidington, David


Clifton-Brown, Geoffrey
Livsey, Richard


Collins, Tim
Lloyd, Rt Hon Sir Peter (Fareham)


Cormack, Sir Patrick
Loughton, Tim


Cotter, Brian
Luff, Peter


Cran, James
Lyell, Rt Hon Sir Nicholas


Curry, Rt Hon David
MacGregor, Rt Hon John


Davey, Edward (Kingston)
McIntosh, Miss Anne


Davies, Quentin (Grantham)
MacKay, Rt Hon Andrew


Day, Stephen
Maclean, Rt Hon David


Dorrell, Rt Hon Stephen
McLoughlin, Patrick


Duncan, Alan
Malins, Humfrey


Duncan Smith, Iain
Maples, John


Evans, Nigel
Mates, Michael


Faber, David
Maude, Rt Hon Francis


Fallon, Michael
May, Mrs Theresa


Fearn, Ronnie
Michie, Mrs Ray (Argyll & Bute)


Flight, Howard
Moore, Michael


Forth, Rt Hon Eric
Moss, Malcolm


Foster, Don (Bath)
Nicholls, Patrick


Fowler, Rt Hon Sir Norman
Norman, Archie


Fraser, Christopher
Oaten, Mark


Gale, Roger
Öpik, Lembit


Garnier, Edward
Page, Richard


George, Andrew (St Ives)
Paice, James


Gibb, Nick
Paisley, Rev Ian






Paterson, Owen
Taylor, Matthew (Truro)


Pickles, Eric
Taylor, Sir Teddy


Prior, David
Tonge, Dr Jenny


Redwood, Rt Hon John
Tredinnick, David


Rendel, David
Trend, Michael


Robathan, Andrew
Tyler, Paul


Robertson, Laurence (Tewk'b'ry)
Tyrie, Andrew


Roe, Mrs Marion (Broxbourne)
Viggers, Peter


Rowe, Andrew (Faversham)
Wallace, James


Ruffley, David
Wardle, Charles


Russell, Bob (Colchester)
Waterson, Nigel


St Aubyn, Nick
Webb, Steve


Sanders, Adrian
Wells, Bowen


Sayeed, Jonathan
Whitney, Sir Raymond


Shepherd, Richard
Whittingdale, John


Smith, Sir Robert (W Ab'd'ns)
Widdecombe, Rt Hon Miss Ann


Soames, Nicholas
Wilkinson, John


Spring, Richard
Willis, Phil


Stanley, Rt Hon Sir John
Winterton, Mrs Ann (Congleton)


Steen, Anthony
Winterton, Nicholas (Macclesfield)


Streeter, Gary
Woodward, Shaun


Stunell, Andrew
Yeo, Tim


Swayne, Desmond
Young, Rt Hon Sir George


Syms, Robert



Tapsell, Sir Peter
Tellers for the Noes:


Taylor, Ian (Esher & Walton)
Mrs. Caroline Spelman and Sir David Madel.


Taylor, John M (Solihull)

Question accordingly agreed to.

Resolved,
That an humble Address be presented to Her Majesty, as follows:
Most Gracious Sovereign,
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

Orders of the Day — EUROPEAN COMMUNITY DOCUMENTS

Mr. Deputy Speaker (Mr. Michael J. Martin): With permission, I shall put together the motions relating to European Community documents.

Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

Orders of the Day — AGRIMONETARY ARRANGEMENTS

That this House takes note of European Community Document No. 9597/98, two draft Council Regulations establishing agrimonetary arrangements and the transitional arrangements to be applied under the Common Agricultural Policy with a view to the introduction of the euro; and supports the Government's intention to support the proposals which simplify the current agrimonetary arrangements by moving to a system which more closely reflects market realities, reducing the costs to taxpayers, consumers and businesses, and also the scope for distortions of competition whilst respecting UK international obligations without discriminating against those Member States not participating in the euro.

Orders of the Day — EC DEVELOPMENT AID (SOUTH AFRICA)

That this House takes note of European Community Document No. 9690/98, the European Court of Auditors Special Report No. 7/98 on the European Development Aid Programme for South Africa (1986–1996) and its recommendations to the Commission; and supports the Government's position that these recommendations are practical and sensible and that the Government will work with Member States and other partners in all European Community

development assistance programmes, and particularly in detailed arrangements to succeed the present EPRD in South Africa, after 1999, to ensure that these recommendations are fully implemented.—[Mr. Pope.]

Question agreed to.

PETITIONS

Bus Service (York)

Miss Anne McIntosh: With permission, I shall present a petition from the residents of Wheatfield lane in the city of York area of the Vale of York. The petition has 200 signatures—petitioners who are residents of Wheatfield lane and who are deeply concerned by the withdrawal of the local bus service operated by First York for a number of years. They are especially concerned that the service is not fitting in with the Government's promise to improve public transport.
It gives me great pleasure to present the petition of the residents to the House of Commons. The petition states:
The Petition of the residents of Wheatfield Lane,
Declares that we are concerned at the decision to alter the Wigginton, Haxby, York bus service so that it no longer serves Wheatfield Lane, thus inconveniencing many residents, the elderly in particular.
The Petitioners therefore request that the House of Commons urge the Secretary of State for the Environment, Transport and the Regions to require increased services and better standards from bus operators.
All the petitioners remain faithfully yours.

To lie upon the Table.

Bootlegging

Mrs. Jacqui Lait: On the day that tobacco duties rise and we look forward to an increase in duty on alcohol—which will reduce revenues to the Treasury, undermine the rule of law and subvert the health policies of reducing the consumption of tobacco and of alcohol—it is a great honour to present to the House of Commons the petition of 1,000 signatures from Independent Retail News, store owners and customers. The petition reads:
Declares that the bootlegging of hand-rolling tobacco, cigarettes and alcohol has reached crisis levels.
Honest shop owners are being driven out of business by bootleggers, who are also robbing the Exchequer of £1 billion per year.
The Petitioners therefore request that the House of Commons should urge the Chancellor of the Exchequer to work with HM Customs and Excise in taking further measures to ensure the relevant legislation prohibiting this illegal trade is vigorously enforced.
And the petitioners remain, etc.

To lie upon the Table.

Gas Supply (Consumer Protection)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pope.]

Mr. Ken Purchase: I am pleased to have the opportunity to bring to the attention of the House what I believe to be a denial of justice for my constituent—Mr. Neil Bailey, from the Wednesfield area of my constituency—by an arm of British Gas known as British Gas Trading, post-privatisation and subsequent reorganisation.
Mr. Bailey became an innocent victim following the digging up of the pavement outside his home by Transco, to repair gas pipes. Transco is another former part of British Gas. It carried out the work and, on completion, the Transco engineer knocked on the door of my constituent's house and asked that he may be allowed into the garage to bleed the system of air, after putting the gas supply back on.
Unfortunately, my constituent's wife, Mrs. Bailey, was unable to give access to the engineer: the meter was located in the garage, to which she did not have access while her husband was away at his work in Birmingham. She was unable to convince the engineer that she had no access, and, in the end, telephoned for Mr. Bailey to leave his work in Birmingham to come to Wolverhampton to allow the engineer into the garage.
I should explain that Mrs. Bailey has a bone disease, which makes life very difficult for her, as well as arthritis and a heart condition, for which she will shortly undergo a double bypass operation.
On Mr. Bailey's return, he not only gave access to the engineer, but loaned him the tools necessary to do the job. He also explained how the engineer might find the person next door to gain access to his premises.
A short while later, when Mr. Bailey was about to return to work, the engineer came up the path again and asked if he could have access once more, through the garage, to the meters. My constituent explained that there was a secure door, which would require a little work, and that in any event it was now time for him to go back to Birmingham and resume his work. He could not put up with further delays.
When Mr. Bailey came home, late in the afternoon, he was met by three people. One was a policeman; the others were from the gas companies. The policeman had a warrant to search the premises, on the ground that Mr. Bailey was suspected of stealing gas from British Gas Trading. It was alleged that he put in and took out a second meter according to the time of arrival of the quarterly bill, this gaining access to gas that he should not have had. That was alleged by the Transco man, who said that he had seen the meter earlier.
A thorough search of the premises was carried out by the police officer and the gas company employees, who—surprise, surprise—found no sign of another meter. End of story, the House may think, perhaps rounded off by an apology; but no—the gas meter was removed, and Mr. Bailey was arrested, taken to the police station and charged with stealing gas.
The forensic examination found nothing wrong, and the Crown Prosecution Service decided not to prosecute by reason of insufficient evidence, there being only the word of the Transco engineer.
End of story now, the House may think. Again, an apology would have helped—but no: British Gas Trading decided that Mr. Bailey was guilty, and told him that it calculated that he had stolen gas from it to the value of £189. To be reconnected, he would need to repay that amount, as well as paying a reconnection charge of £39.
Hon. Members can imagine the exasperation felt by my constituent. He had been arrested, charged and taken to a police station; no evidence had been found. The Crown Prosecution Service had said, "Don't take it any further," but British Gas Trading decided to charge him, try him and find him guilty, without any evidence worth talking about.
This has been going on for nearly 12 months. The incident happened in January. Hon. Members should bear in mind the great distress caused to my constituent and his disabled wife.
Mr. Bailey engaged a solicitor to take on the case, but with no success. The gas company simply cited its decision, and justified it under its powers to protect its revenue. I do not oppose such powers; it is right and proper for the industry to be able to protect its revenue. I merely ask it do so in a proper and sensible way, by referring as fully as possible to evidence that it may have.
My own correspondence on the matter has produced no better result. I have written, on behalf of Mr. Bailey, to every big noise in each of the companies—Transco, Centrica, British Gas Home Energy, British Gas Trading and the Gas Consumers Council—to no avail. The defence of the gas companies was repeated like a mantra, ad nauseam, by the chairmen and their understrappers. I believe that the chairmen should take the blame for not responding to a reasoned and sensible series of letters from a Member of Parliament, and should have taken it on themselves to investigate the matter properly and thoroughly. They knew all the circumstances; they were left in no doubt of the position. None the less, they chose merely to repeat the mantra, "We have the powers; we will protect our revenue."
My constituent has two killer pieces of evidence on his side. First, he has retained all his gas bills for the 20 years during which he has lived in the house—gas bills relating to when the meter was first read, stating "zero, zero, zero". He also has his rates bill, his water bill, his electricity bill and all the household bills that so many of us always manage to mislay somewhere or other. He is the perfect book-keeper. They show a consistency in the use of gas over the years, and the gas companies in a better light in the past four years, when the increase in gas bills has been relatively stable because of the falling gas price. The gas companies knew he had all those bills. I believe that the Gas Consumers Council saw the bills.
When my constituent said to me, "I have all my bills," I said, "I am sure you do. I believe you." He was not satisfied that I believed him. The next week, he brought the gas bills to my surgery for me to see, so he was determined to show me that everything that he had was above board and available for any one to inspect any time they wanted.
The second piece of killer evidence is that the chap who has been reading my constituent's gas meter all these years lives a few doors away. He said to my constituent in the local social club, "I have seen your meter over all the years. I can swear on oath that that is the gas meter that has always been there."
Bearing in mind that my constituent had perhaps up to half an hour to change his gas meter on the first call, and perhaps another half an hour when he returned from work, it stretches credibility to believe that he would change the gas meter, but, there we are, the chap who has been reading the meter for years lives close by. He and my constituent socialise anyway, meeting occasionally in the local social club. He would say under oath that this is the meter that he has always been used to reading.
The gas authorities know both those things, but even that has not moved British Gas Trading—that is, hon. Members will be pleased know, until my Adjournment debate was announced. I am sure that it is an absolute and total coincidence that an offer has now been made—an offer that, frankly, is almost as bad as the initial problems that British Gas Trading has caused for my constituent.
The offer calls for my constituent to make a deposit of £250, which is more than it would have cost him to have the thing reconnected, but of course he would have been accused of being guilty had he met those unjust and unjustified bills. I assure the authorities that he will not settle for that. He needs to have the thing settled properly: to have an apology, with the whole thing reconnected without any further charges.
Much of this has been caused by the nature of the organisation and the apparent continual reorganisation that it has been undergoing. There has also been an element of stubbornness not to recognise that this was a matter that could have been resolved by someone visiting my constituent, looking at the evidence and understanding that, almost certainly, when the Transco engineer looked at the meter, there was a haze: a simple, honourable mistake, none the less compounded in the engineer's mind by the fact that my constituent, having left Birmingham and arrived in Wolverhampton, then wanted to return to his work—that was reasonable and fair in the circumstances—and did not want to open the garage the second time.
Ofgas has powers to intervene, but they are not sufficient. My constituent and his disabled wife could say, "Please investigate my case," but, in the meantime, his gas would remain unreconnected; it would probably be unreconnected well past Christmas while investigations took place. Indeed, it may be a difficult case to investigate, but the whole raft of difficulties could have been resolved by an early intervention.
When reviewing these matters, the Minister may consider whether a duty should be placed on gas companies—more than one is involved throughout the country—to refer to, and consult with, Ofgas to avoid what has become a Winslow Boy-type affair, which none of us wants, and which has deprived my constituent and his disabled wife of the fuel that they need to heat their house. I ask that the matter be investigated properly and thoroughly.
I hope that British Gas Trading—having heard the matter articulated in this debate, not simply reading about it—will understand that it is incumbent on it to make a proper, sensible and final offer that will absolve my constituent Mr. Bailey and reconnect his gas supply.

The Minister for Energy and Industry (Mr. John Battle): I thank my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) for raising his

constituent's case. Although some may say that it is inappropriate to deal with individuals' problems in the House, I do not agree with them. Quite often, we discover in our constituency cases and surgeries how laws, Budgets and the practices of private companies impact on individuals. It is certainly appropriate that we should stand up in the House for those whom we feel have been treated unjustly, speak out for them and raise their cases. I therefore welcome the fact that my hon. Friend has dealt with his constituent's case, and the way in which he has done so.
My hon. Friend said that his constituent kept careful accounts and old bills. How often do people do so? Nevertheless, I should say that generally—I shall comment in a moment on the individual case—many of our constituents do their homework, have been conscientious in dealing with matters and deserve to be treated with the utmost respect and seriousness. If the word "customer" is to mean anything, customers have to be treated with absolute respect and be treated as companies' first priority.
The purpose of the Government's proposals in our fair deal for consumers is to renew and refresh regulation and to put consumers at the heart of the process, so that they really do come first. The law states that not people but establishing competition should be the first priority, but competition should benefit people. If it does not work for people, why have it?
I cannot go into the details of the individual case raised by my hon. Friend. It would be inappropriate for me to do so, especially as the case between the parties is unresolved. The case went to the Gas Consumers Council, which did not refer it—as, perhaps, it should have—to Ofgas, as the case was to go to court. The council perhaps felt that it should not act further on the matter.

Mr. Purchase: The case did not get to court.

Mr. Battle: Perhaps the appropriate course would have been for the Gas Consumers Council to have referred the case to Ofgas. Those at Ofgas were seemingly unaware of the case until my officials alerted them to it, because of this debate. It does seem a bit odd that, before Ofgas would take the case seriously, my hon. Friend had to go to the effort of writing to Madam Speaker to request an Adjournment debate. There seems to be a gap in the system.
We shall fill that gap by giving power to the Gas Consumers Council to be the sole point of contact when we change the regulatory rules, so that people know clearly where to go, and so that the council will champion cases right the way through the system and take on the companies.
I hope that the case will be resolved by a revised offer by the supplier. I have been informed that the parties will be meeting, when the matter can perhaps be resolved. Ofgas can use its formal powers to resolve such disputes. Gas companies and suppliers are obligated to use their licences to ensure that customers' domestic properties are supplied with gas. Should Ofgas—having considered the evidence from all parties in a dispute—decide that a disconnection is unjustified, the Director General of Gas Supply, the regulator of Ofgas, can use enforcement powers to require a reconnection. Mr. Bailey could have asked—he still could ask—Ofgas to use those legal powers.
Gas competition was opened up under the previous Administration and the process was completed on 23 May. There has now been a roll-out of 10 other suppliers which compete with British Gas. In the past year, that has resulted in consumer-related problems, including doorstep selling. I raised the matter with the Director General of Gas Supply last year, soon after taking office, and insisted on the introduction of a marketing licence condition that regulates the practices of companies involved in doorstep selling.
There is now a clear code of conduct and companies risk losing their licences and being fined if they abuse their customers—our constituents—in that way. We consider improper marketing tactics and doorstep sales unacceptable and we will not tolerate them. The Department is currently consulting on modifications to strengthen the Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) 1987 Regulations.
It is clear that some consumers continue to experience problems when they switch gas supplier. In that respect, some gas suppliers are proving worse than others. Problems can range from delays in transferring to a new supplier to disputes about billing. We should be aware of the distress caused to consumers, particularly the elderly and disadvantaged, if they are billed wrongly and suddenly receive a huge bill. They are then told that they are in dispute with their supplier. When they dealt with one nationalised company, consumers did not face the difficulties that inevitably arise now that there are more than 20 companies. Ofgas is aware of the switching problems and is working with the industry to get it right.
Customers are also experiencing erroneous transfer because of doorstep selling or administrative problems. They can be switched to a new supplier without having requested a transfer. That is unacceptable and Ofgas is tightening up the transfer procedures.
Since April 1996, the number of competing suppliers has doubled to about 20 and some 3 million out of 19 million households have switched supplier. There is great turmoil in the marketplace. The introduction of competition on such a scale and in such a time scale has been a considerable achievement and problems were inevitable.
Following my expressions of concern, the Association of Energy Suppliers has put together a code of practice revising the practice of doorstep selling so that companies have to hand over clear written information about their tariffs—they can no longer sign up people on the doorstep. We hope that the practice will now be jettisoned. All members of the association have signed up to the revised code and I have made it clear to the gas and electricity regulators that I expect them to take action in respect of companies that do not adhere to the new code.
All gas suppliers have a duty to establish procedures to handle disconnection complaints. If a consumer cannot resolve a problem with a gas supplier, the first port of call should be the Gas Consumers Council. If the GCC cannot resolve a problem on behalf of a consumer, it should be referred to Ofgas for arbitration.
It would be wrong and misleading to pretend that the regulatory framework was perfect when we took office. The hon. Member for Daventry (Mr. Boswell), the shadow spokesman on energy issues, is in his place and he would concede that.
Our Green Paper "A Fair Deal for Consumers: Modernising the Framework for Utility Regulation" proposes changes to utility regulation. We want to put consumers at the heart of regulation. We set out many proposals, including the merger of Offer and Ofgas, new powers for Ministers to issue statutory guidance on social obligations and environmental objectives and measures to improve the transparency of regulation of the energy industries and decisions to replace energy and telecoms regulators with small boards. We propose a new primary duty on regulators to protect and promote the interests of consumers wherever possible, through promoting competition but ensuring that the Government establish consumer councils for each of the utilities. A consumer council for energy will be established on a fully independent and statutory basis, backed up by resources. We envisage that consumer council playing a key role in articulating a strategic and independent view of consumer interests to the regulators, companies, Parliament and the media. It will be the single point of contact for people and it will have to take action.
We also want to strengthen the position of consumers by ensuring that all the regulators have the powers already held by some to impose financial penalties on companies for breaches of overall and individual customer service standards. Companies will be fined in retrospect if they get it wrong. That should strengthen the system.
We plan to encourage stronger links between customer service standards and the price caps on energy and directors' pay, to tie it in more rigorously than has been the case. We did not inherit a perfect system. We have had to overhaul the regulatory framework. We have put forward proposals on that and are looking for support to take those proposals that require legislation through the House. The new regulator will be the first energy regulator to bring together gas and electricity and build in our new guidelines.
The independent regulator will have a statutory duty to investigate and take enforcement action to prevent licence breaches. Ofgas is already working closely with the industry to solve the problems that consumers are experiencing and to tighten up the codes of practice and the licence conditions. The Gas Consumers Council, which is an independent statutory body set up to deal with consumer complaints, will be strengthened as the first point of contact. We are also reviewing utility regulation with the key aim of building into law that the consumer should be at the heart of the regulatory framework and should take precedence. The law that we inherited says that setting competition in train should be the primary duty of the regulators. That will be changed to make the primary duty protecting the consumer. If consumers do not like the service that they receive, they can and should demonstrate their concerns. They can change to other suppliers, but it is important that their supplier delivers the right quality of service.
Price is important in regulation and people naturally want lower bills, but they deserve quality and back-up in their service. That is paramount. If gas companies talk about consumer service, they ought to take their customers seriously and treat them with ultimate respect. We shall ensure that the law backs that up.
There will be a single point of contact. There is a competitive market for energy, but we shall ensure that the marketplace is regulated. We shall ensure that the poor are not priced out—that is imperative—that

environmental responsibilities are taken seriously and that when there are breaches of licence conditions, action is taken against the companies concerned.
I thank my hon. Friend for raising the subject. The individual case that he has mentioned shows that we have to ensure that the structure exists to deal with future cases so that people get full justice.

Question put and agreed to.

Adjourned accordingly at eight minutes past Eleven o' clock.